London open: Shell leads oil stocks lower as markets react to Fed

Heavy falls from Shell and other blue chips in the oil sector weighed heavily on UK stock markets on Thursday, as investors reacted to another plunge in crude prices and the Federal Reserve’s outlook for interest rates.

Shell said it would be cutting $15bn of potential spending over the next three years as its fourth-quarter results missed forecasts. Meanwhile, oil prices were trading near their lowest in nearly six years.

London’s FTSE 100 was down 0.8% at 6,773 early on, tracking late declines on Wall Street after a policy announcement from the Federal Open Market Committee (FOMC).

The Fed painted an improved picture of the economy, changing its language about recent job gains from “solid” to “strong”, and adjusting its view of the recovery from “moderate” to “solid”.

However, it said it would still "be patient in beginning to normalise the stance of monetary policy" and highlighted that it was watching global economic developments.

The language was widely interpreted to mean that policymakers won't begin to hike rates from near-zero for at least another two FOMC meetings.

Analysts at Danske Bank said the statement “raises the likelihood of a later hike than we currently anticipate (June 2015)”.

Brent crude was down 0.1% at $48.41 a barrel, extending losses after a sharp drop on Wednesday after US government data showed that crude inventories in the States rose by 8.87m barrels to 406.7m last week, the highest since the early 1980s.

Shell curtails spending after weak Q4

Oil major Shell said it is looking to reduce costs and lower investment in 2015 in response to the collapse in crude prices, as it curtailed over $15bn of potential spending over the next three years. The comments came as the firm reported adjusted annual profit growth of 12% in the fourth quarter to $3.3bn, well below the consensus forecast of $4.2bn.

Shell’s shares were down over 3% early on, dragging others in the sector lower such as BP, BG Group, Tullow Oil, Afren and Soco International.

News of a cut in spending by one of the biggest oil groups in the world was also weighing on stocks in the energy services and equipment sectors, such as Weir Group, Petrofac, Wood Group and Hunting.

Banking stocks were also under pressure in London, with RBS, HSBC, Barclays, Lloyds and Standard Chartered all trading firmly in the red.

Royal Mail declines after revealing that its chairman Donald Brydon will step down later this year.

Market Movers
techMARK 3,073.24 -0.34%
FTSE 100 6,772.57 -0.78%
FTSE 250 16,322.76 -0.63%

FTSE 100 - Risers
easyJet (EZJ) 1,807.00p +2.26%
Experian (EXPN) 1,203.00p +1.60%
Diageo (DGE) 1,986.50p +1.25%
Unilever (ULVR) 2,933.00p +1.24%
Rolls-Royce Holdings (RR.) 888.00p +0.62%
Imperial Tobacco Group (IMT) 3,108.00p +0.36%
Smith & Nephew (SN.) 1,195.00p +0.34%
Rio Tinto (RIO) 2,901.50p +0.24%
Centrica (CNA) 288.30p +0.24%
Aggreko (AGK) 1,534.00p +0.20%

FTSE 100 - Fallers
Weir Group (WEIR) 1,607.00p -4.17%
Royal Dutch Shell 'B' (RDSB) 2,178.50p -3.09%
Royal Dutch Shell 'A' (RDSA) 2,087.00p -3.09%
BP (BP.) 420.40p -2.90%
BG Group (BG.) 875.00p -2.54%
Standard Chartered (STAN) 884.80p -2.23%
Dixons Carphone (DC.) 419.50p -2.21%
Randgold Resources Ltd. (RRS) 5,470.00p -2.06%
Royal Bank of Scotland Group (RBS) 367.60p -1.95%
3i Group (III) 455.50p -1.85%

FTSE 250 - Risers
Jimmy Choo (CHOO) 177.20p +3.02%
IP Group (IPO) 230.70p +2.08%
Henderson Group (HGG) 240.00p +1.82%
Nostrum Oil & Gas (NOG) 570.00p +1.79%
De La Rue (DLAR) 520.50p +1.76%
Infinis Energy (INFI) 190.00p +1.60%
Synthomer (SYNT) 247.70p +1.18%
Brit (BRIT) 260.90p +1.12%
Card Factory (CARD) 270.00p +1.12%
Ophir Energy (OPHR) 127.20p +1.03%

FTSE 250 - Fallers
Afren (AFR) 4.03p -14.26%
Centamin (DI) (CEY) 65.45p -4.80%
Kaz Minerals (KAZ) 185.10p -3.64%
Soco International (SIA) 269.90p -3.61%
Vedanta Resources (VED) 377.90p -3.00%
Amec Foster Wheeler (AMFW) 808.00p -2.94%
Euromoney Institutional Investor (ERM) 1,047.00p -2.88%
Hunting (HTG) 402.90p -2.85%
Evraz (EVR) 172.60p -2.82%
Wood Group (John) (WG.) 562.50p -2.68%