London midday: Stocks slide as oil prices fall, eurozone remains in deflation

London stocks were in the red on Tuesday as oil prices fell and official data showed the eurozone remained in deflation.

Oil prices dropped as international markets were hit by a rise in Middle Eastern crude exports, fuelling concerns about the global supply glut.

Iraq will supply 5 million barrels of extra crude to its international oil company partners in June, Reuters reported citing sources. Saudi Arabia, Kuwait and Iran also plan to increase supplies in the third quarter.

At 1130 BST, Brent crude declined 0.42% to $49.55 per barrel and West Texas Intermediate slipped 0.24% to $49.49 per barrel.

Meanwhile, Eurostat said the euro-area’s consumer price index fell an annualised 0.1% in May, as expected by analysts, compared to a 0.2% drop in April.

The improvement was driven by increases in food, alcohol, tobacco and non-energy industrial goods. However, energy prices continued to fall, albeit at a slower pace.

Core inflation, which excludes volatile items such as food and energy, rose 0.8% year-on-year in May which was in line with forecasts and followed a 0.7% increase in April.

The data comes ahead of the European Central Bank's policy announcement on Thursday. The ECB, which is targeting inflation of just below 2%, is expected to keep policy unchanged. In March the ECB introduced a raft of stimulus measures to mend price stability including the expansion of the asset purchase programme and a cut to interest rates.

“Draghi has tried everything in his powers to stimulate the stubborn eurozone, and although inflation has ticked up slightly, he has yet to make any real inroads," said Dennis de Jong, managing director at UFX.com.

“With global uncertainty swirling, and a British vote on EU membership looming large, many observers appear to be sitting on their hands until the picture is clearer.”

Separately, Eurostat said the unemployment rate in the eurozone was 10.2% in April, unchanged from March and in line with economists' expectations.

Still to come, US personal consumption expenditure figures at 1330 BST, the US S&P Cast/Shiller home price index at 1400 BST, the Chicago purchasing managers’ index (PMI) at 1445 BST, US consumer confidence index at 1500 BST and the Dallas Fed manufacturing PMI at 1530 BST.

Among corporate stocks, oil producers were sitting lower on the slump in crude prices. BHP Billiton, BP and Tullow Oil slumped.

Inmarsat was also under the cosh as the FTSE Russell reported that the satellite communications company could be pushed out of the FTSE 100 by Hikma Pharmaceuticals. Hikma’s shares rallied on the news.

IG Group shares climbed after the spreadbetting firm reported solid trading in the fourth quarter and said earnings for the year are set to be slightly ahead of expectations.

Alliance Trust advanced as said it has received an unsolicited, informal approach from fellow FTSE 250 investment trust RIT Capital Partners that proposed a merger of the two companies.