London open: Stocks decline as oil reaches fresh 12-year low

UK stocks declined on Wednesday as oil prices reached a fresh 12-year low, falling below $28 per barrel.

Brent crude fell 2.8% to $27.96 per barrel at 0853 GMT after the International Energy Agency warned that oil prices will likely slide further this year as the market contends with an oversupply of production following the lifting of Iran sanctions. West Texas intermediate was down 3.2% to $28.63 per barrel at 0855 GMT.

“Since the beginning of this year equity markets have not only spun their wheels, they have lost any semblance of positive traction as continued concerns of oversupply in the oil and gas market set against a backdrop of slowing global growth has seen stock markets across the globe slip back into bear market territory,” said Michael Hewson, chief market analyst at CMC Markets.

Japan’s Nikkei index closed in a bear market and Hong Kong’s Heng Seng index reached a three-and-a-half-year low amid the slide in oil prices and concerns about China’s economic slowdown. Gross domestic product unexpectedly fell to 6.8% in the fourth quarter from 6.9% previously, official data showed on Tuesday.

Turning to Wednesday’s agenda, UK jobs data at 0930 GMT will be closely scrutinised as the Bank of England weighs the best timing for an interest rate hike. The Office for National Statistics is expected to reveal the unemployment rate for the three months to November held at 5.2% and that UK employers added 235,000 jobs. Average weekly earnings are forecast to rise 2.1% during the period, following a 2.4% increase the previous three months.

“Pay growth will continue to slow in November, in part due to base effects, but should rise back over the coming months as these base effects fall away,” HSBC analysts said.

The BoE last month decided to keep interest rates unchanged amid a slowdown in wage growth, a fall in the price in oil, a stronger pound and volatility in China. BoE Governor Mark Carney on Tuesday said that the UK economy is not strong enough to contemplate raising interest rates.

Meanwhile, US inflation figures are also due at 1330 GMT. Analysts expect the consumer price index rose 0.8% year-on-year in December, picking up from the previous month’s 0.5% growth. The US will also see house starts figures at 1330 GMT.

In company news, WH Smith jumped after saying sales from its shops at airports and train stations were up 5% in the 20 weeks to 16 January although High Street sales were flat over the period.

JD Wetherspoons plunged after saying operating margins would fall in the first 12 weeks of the second quarter compared to the same period last year due to increased labour costs. Chairman Tim Martin warned that his current view was that profits for this year were "likely to be towards the lower end of analysts' expectations".

Pets at Home rose after posting slightly better-than-expected sales for the third quarter, along with a rise in total revenue growth.

Anglo American dropped after agreeing to sell its 100% interest in the Callide thermal coal mine in Queensland, Australia, to Batchfire Resources for an undisclosed sum.

Fellow miners Glencore, BHP Billion and Rio Tinto were also in the red as Asian stocks tumbled on China worries.

Oil producers Royal Dutch Shell, Tullow Oil and Nostrum Oil & Gas slipped on another fall in oil prices.

Market Movers

FTSE 100 (UKX) 5,714.92 -2.75%
FTSE 250 (MCX) 15,787.88 -2.03%
techMARK (TASX) 3,021.44 -2.17%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 4,288.00p 0.47%
SABMiller (SAB) 4,106.50p -0.76%
United Utilities Group (UU.) 912.50p -0.87%
Intertek Group (ITRK) 2,688.00p -1.36%
National Grid (NG.) 931.70p -1.40%
DCC (DCC) 4,988.00p -1.42%
Inmarsat (ISAT) 1,038.00p -1.52%
Royal Mail (RMG) 429.70p -1.58%
SSE (SSE) 1,400.00p -1.62%
Imperial Tobacco Group (IMT) 3,500.50p -1.66%

FTSE 100 - Fallers

Anglo American (AAL) 221.35p -7.31%
Glencore (GLEN) 73.86p -6.48%
BHP Billiton (BLT) 587.20p -6.36%
Prudential (PRU) 1,327.50p -4.67%
Royal Dutch Shell 'B' (RDSB) 1,307.00p -4.56%
Royal Dutch Shell 'A' (RDSA) 1,304.00p -4.47%
Fresnillo (FRES) 635.00p -4.44%
Pearson (PSON) 654.50p -4.38%
St James's Place (STJ) 884.50p -4.38%
Rio Tinto (RIO) 1,586.50p -4.25%

FTSE 250 - Risers

WH Smith (SMWH) 1,684.00p 6.05%
Pets at Home Group (PETS) 238.10p 2.10%
Hays (HAS) 119.50p 1.62%
Daejan Holdings (DJAN) 6,070.00p 0.66%
Shawbrook Group (SHAW) 305.00p 0.63%
Ultra Electronics Holdings (ULE) 1,868.00p 0.59%
Euromoney Institutional Investor (ERM) 929.00p 0.32%
Ocado Group (OCDO) 259.70p 0.23%
3i Infrastructure (3IN) 170.90p 0.12%
Mitie Group (MTO) 282.80p 0.07%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 615.00p -8.82%
Amec Foster Wheeler (AMFW) 354.30p -7.13%
Tullow Oil (TLW) 119.00p -7.03%
Nostrum Oil & Gas (NOG) 310.90p -4.98%
Enterprise Inns (ETI) 90.70p -4.78%
Howden Joinery Group (HWDN) 469.20p -4.73%
Worldwide Healthcare Trust (WWH) 1,690.00p -4.63%
Jardine Lloyd Thompson Group (JLT) 814.50p -4.63%
Just Eat (JE.) 418.10p -4.59%
Vedanta Resources (VED) 204.60p -4.57%