London open: Middle East tensions dent stocks but oil surge boosts BP, Shell

London equity markets fell in early trade on Friday after Iran’s top general was killed by a US airstrike in Iraq, but energy shares rallied as geopolitical tensions sent oil prices surging.

At 0830 GMT, the FTSE 100 was down 0.3% at 7,582.43.

General Qasem Soleimani was killed earlier on Friday at Baghdad airport in a strike ordered by US President Donald Trump. Soleimani was head of Iran’s elite Quds Force. Iran’s Supreme Leader, Ayatollah Ali Khamenei, vowed "severe retaliation" for the killers.

The US defence department said in a statement: "At the direction of the president, the US military has taken decisive defensive action to protect US personnel abroad by killing Soleimani. General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region."

Iran’s Foreign Minister Javad Zarif, said on Twitter that the killing was "an act of international terrorism" directed against "the most effective force fighting" Islamic State and al Qaeda.

Spreadex analyst Connor Campbell said: "Though Suleimani may be unknown by many in the West, some political analysts have likened him to a US vice president in terms of profile, while he has previously been described as the ‘single most powerful operative in the Middle East’.

"Important to bear in mind when considering the kind of response that could be expected from Iran (a nation, remember, that has major ties to Russia and China)."

Oil prices jumped as geopolitical tensions threatened supply, with West Texas Intermediate up 2.9% at $63.01 a barrel and Brent crude 3.1% higher at $68.40. BP, Shell, Premier Oil, Tullow Oil and Wood Group all gained.

Precious metals miners were also on the rise as gold prices pushed higher, with Polymetal, Hochschild, Centamin and Fresnillo all trading up.

On home turf, investors were mulling the latest survey from Nationwide, which showed that annual UK house price growth topped 1% in December for the first time in 12 months as a healthy labour market helped to offset economic uncertainty.

House prices rose 1.4% on the year compared to 0.8% growth in November, meeting analysts’ expectations. On the month, prices ticked up 0.1%, down from 0.5% growth in November but a touch better than expectations of no growth.

Nationwide’s chief economist Robert Gardner said: "Indicators of UK economic activity were fairly volatile for much of 2019, but the underlying pace of growth appeared to slow through the year as a result of weaker global growth and an intensification of Brexit uncertainty.

"The underlying pace of housing market activity remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years. Healthy labour market conditions and low borrowing costs appear to have offset the drag from the uncertain economic outlook.

"Looking ahead, economic developments will remain the key driver of housing market trends and house prices. Much will continue to depend on how quickly uncertainty about the UK’s future trading relationships lifts as well as the outlook for global growth."

Gardner said house prices were expected to remain broadly flat over the next twelve months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the rise in year-on-year growth above 1% for the first time in 12 months is another sign that the housing market is getting back on its feet.

"Admittedly, a base effect- prices fell by 0.5% month-to-month in December 2018- helped to boost the year-over-year growth rate. But prices also have been lifted in recent months by the sharp decline in mortgage rates."

In UK corporate news, fashion retailer Next was in the green after it raised full-year profit guidance as a colder November and improved stock availability provided a boost for sales over the Christmas period.

On the downside, gambling stocks were under pressure, with GVC Holdings, 888 and William Hill all weaker following reports the Gambling Commission is considering whether to ban VIP schemes in Britain. This follows a series of scandals in which customers were allowed to bet with stolen money or lose huge amounts without adequate checks on whether they could afford it.

Market Movers

FTSE 100 (UKX) 7,582.43 -0.29%
FTSE 250 (MCX) 22,024.81 -0.38%
techMARK (TASX) 4,196.32 -0.30%

FTSE 100 - Risers

BP (BP.) 488.70p 1.63%
Polymetal International (POLY) 1,210.50p 1.59%
Royal Dutch Shell 'A' (RDSA) 2,288.00p 1.40%
Royal Dutch Shell 'B' (RDSB) 2,286.00p 1.22%
Next (NXT) 7,042.00p 1.21%
Imperial Brands (IMB) 1,889.20p 0.70%
NMC Health (NMC) 1,765.00p 0.66%
Smith & Nephew (SN.) 1,835.50p 0.22%
British American Tobacco (BATS) 3,266.50p 0.05%
Associated British Foods (ABF) 2,581.00p 0.04%

FTSE 100 - Fallers

Evraz (EVR) 397.20p -2.19%
International Consolidated Airlines Group SA (CDI) (IAG) 624.40p -1.85%
easyJet (EZJ) 1,408.00p -1.54%
Smith (DS) (SMDS) 380.70p -1.53%
TUI AG Reg Shs (DI) (TUI) 977.20p -1.41%
CRH (CRH) 3,059.00p -1.29%
Johnson Matthey (JMAT) 2,993.00p -1.29%
Glencore (GLEN) 237.95p -1.29%
ITV (ITV) 149.00p -1.26%
Hargreaves Lansdown (HL.) 1,938.00p -1.25%

FTSE 250 - Risers

Tullow Oil (TLW) 62.46p 4.69%
Premier Oil (PMO) 104.25p 4.67%
Centamin (DI) (CEY) 131.15p 3.51%
Hochschild Mining (HOC) 181.40p 2.83%
Wood Group (John) (WG.) 397.80p 2.76%
St. Modwen Properties (SMP) 512.00p 1.99%
Cairn Energy (CNE) 207.60p 1.76%
Fresnillo (FRES) 655.00p 1.71%
Petrofac Ltd. (PFC) 389.00p 1.59%
Bakkavor Group (BAKK) 148.00p 1.51%

FTSE 250 - Fallers

Galliford Try (GFRD) 110.00p -87.58%
Bovis Homes Group (BVS) 1,337.00p -3.19%
PPHE Hotel Group Ltd (PPH) 1,860.00p -3.13%
Senior (SNR) 180.60p -2.90%
Sirius Minerals (SXX) 3.55p -2.90%
Marshalls (MSLH) 851.00p -2.85%
Sanne Group (SNN) 689.00p -2.55%
Elementis (ELM) 180.00p -2.44%
FirstGroup (FGP) 124.30p -2.43%
Aggreko (AGK) 829.00p -2.36%