London midday: Stocks slump on oil sector worries

UK stocks slumped on Tuesday as BP’s full year losses added to concerns about the health of the oil sector amid falling prices.

BP's shares tumbled after it posted a full year loss of $6.5bn (£4.53bn), reflecting write-downs and restructuring charges. Fourth-quarter underlying profits fell to $196m (£136m), compared with $2.2bn for the same period the previous year. Yet BP held its quarterly dividend at 10 cents a share.

The results dragged shares of other oil producers into the red including Royal Dutch Shell, BHP Billiton and Tullow Oil.

“This morning’s results from BP have added to the gloom surrounding the sector,” said Michael Hewson, chief market analyst at CMC Markets.

“As it stands BP had already announced 4,000 job losses earlier this year, with 600 in the North Sea as well as further capital expenditure cuts in an attempt to ride out the storm, but there is a worry that with a dividend yield of 7.3% and a dividend cover of 0.5 it could be susceptible to a cut in the coming months, particularly given how bad this morning’s results are.”

Fuelling the weak sentiment in the sector, oil prices continued to decline with Brent crude down 3.0% to $33.24 per barrel and West Texas Intermediate down 2.9% to $31.71 per barrel at 1128 GMT.

In economic data, UK construction activity growth slowed in January, according to Markit/CIPS. The purchasing managers’ index fell to 55.0 last month from 57.8 in December, missing forecasts of 57.5. A reading above 50 signals an expansion in the industry while a level below that indicates a contraction.

German unemployment declined 20,000 in January, compared to analysts’ estimates of 8,000 and the previous month’s 16,000 decrease, according to Destatis. The unemployment rate unexpectedly fell to 6.2% from 6.3%.

Among corporate stocks, Sainsbury’s advanced after agreeing a deal to buy Home Retail for about £1.3bn.

TalkTalk jumped after reporting revenue growth of 1.8% in the third quarter, despite losing 101,000 customers due to a serious cyber attack early in the period.

Ocado Group reversed earlier gains after it reported double-digit revenue growth for the year in the face of fierce competition.

St Modwen Property declined as the developer announced the retirement of long-time chief executive Bill Oliver.

3i Infrastructure rallied after saying its portfolio continued to perform well for the three months to 31 December 2015.

Tullett Prebon slid as the US Department of Justice asked for more information over the proposed acquisition of ICAP’s global hybrid voice broking and information business.

Market Movers

FTSE 100 (UKX) 5,961.57 -1.63%
FTSE 250 (MCX) 16,403.44 -0.52%
techMARK (TASX) 3,157.98 -0.37%

FTSE 100 - Risers

Hikma Pharmaceuticals (HIK) 2,094.00p 3.20%
Sainsbury (J) (SBRY) 247.60p 1.23%
BT Group (BT.A) 498.45p 0.86%
Associated British Foods (ABF) 3,177.00p 0.86%
Merlin Entertainments (MERL) 416.70p 0.73%
Admiral Group (ADM) 1,779.00p 0.62%
Worldpay Group (WI) (WPG) 311.40p 0.45%
InterContinental Hotels Group (IHG) 2,354.00p 0.38%
Shire Plc (SHP) 3,930.00p 0.20%
Bunzl (BNZL) 1,870.00p 0.11%

FTSE 100 - Fallers

BP (BP.) 336.40p -8.33%
BHP Billiton (BLT) 632.70p -6.70%
Anglo American (AAL) 256.10p -6.55%
Standard Chartered (STAN) 436.65p -5.08%
Rio Tinto (RIO) 1,614.50p -4.81%
Rolls-Royce Holdings (RR.) 532.00p -4.14%
Old Mutual (OML) 160.60p -3.83%
Royal Dutch Shell 'B' (RDSB) 1,445.00p -3.67%
Royal Dutch Shell 'A' (RDSA) 1,446.50p -3.21%
Pearson (PSON) 765.00p -3.04%

FTSE 250 - Risers

Allied Minds (ALM) 330.00p 9.24%
TalkTalk Telecom Group (TALK) 234.50p 7.62%
Circassia Pharmaceuticals (CIR) 294.30p 3.88%
UDG Healthcare Public Limited Company (UDG) 561.50p 3.03%
CLS Holdings (CLI) 1,634.00p 2.77%
Card Factory (CARD) 368.40p 2.13%
Homeserve (HSV) 403.90p 1.84%
Brown (N.) Group (BWNG) 314.40p 1.81%
Rathbone Brothers (RAT) 2,218.00p 1.74%
Fidelity China Special Situations (FCSS) 121.10p 1.68%

FTSE 250 - Fallers

Tullow Oil (TLW) 158.60p -7.36%
Rotork (ROR) 158.90p -6.25%
Weir Group (WEIR) 815.50p -5.99%
Vedanta Resources (VED) 221.00p -5.47%
Essentra (ESNT) 694.00p -5.19%
Evraz (EVR) 55.80p -5.10%
IMI (IMI) 765.50p -4.55%
Victrex plc (VCT) 1,486.00p -3.88%
Ophir Energy (OPHR) 86.75p -3.61%
Petrofac Ltd. (PFC) 764.00p -3.54%