Sector Movers: BP's financials, oil price decline weigh on resource stocks

Resource stocks plummeted on Tuesday as oil futures continued to fall and oil giant BP posted a weak set of financials.

The FTSE 100 ended 2.28 % or 138.09 points lower at 5,922.01, while the FTSE 250 fell 1.15% or 189.58 points to 16,299.69. Oil futures remained on verge of reversing all of the past week’s gains with little news to the upside, while base metals posted meek gains over afternoon trading in Europe.

Earlier, the People's Bank of China injected CNY 100bn (£10.6bn) into the money markets in the form of short term loans. The move was an obvious bid to stave off liquidity pressures ahead of the Chinese New Year holiday, which begins on 7 February and lasts a week.

It was the first of the usual two weekly money market injections the bank performs. However, lacklustre economic data from the US and China overnight, and little movement on the possibility of oil production cuts meant oil prices continued to slide.

At 1638 GMT, the Brent front-month futures contract was down 3.04% or $1.07 to $33.20 per barrel, while WTI was 3.29% or $1.05 lower at $30.58 per barrel, following another rocky session for the oil markets.

However, base metal futures posted marginal gains across the London Metal Exchange board. At 1635 GMT, the much scrutinised three-month copper delivery contract was up 0.2% to $4,542.50 per metric tonne, but still within range of six-year lows.

Concurrently, primary aluminium (up 0.1%), zinc (up 2.0%), lead (up 1.5%) and tin (up 0.6%) contracts also headed higher, but nickel (down 1.2%) futures continued to slide.

Precious metal contracts failed to hold on to overnight gains despite registering upticks for much of the Asian session. COMEX gold futures for April delivery fell 0.18% or $2.00 to $1,125.90 an ounce, while spot gold was 0.30% or $3.37 lower at $1,125.04 an ounce.

In what is fast becoming a recurring theme, resource stocks continued to struggle throughout the trading session. Oil major BP (down 8.68%) led the FTSE 100 fallers after posting a full year loss of $6.5bn (£4.53bn), reflecting write-downs and restructuring charges.

Fourth-quarter underlying profits fell to $196m, compared with $2.2bn for the same period the previous year. Yet BP held its quarterly dividend at 10 cents a share. The results also weighed on rival Royal Dutch Shell.

Anglo American (down 7.99%) and BHP Billiton (down 6.74%) ended up in negative territory as well, after Standard & Poor's downgraded the latter’s credit rating overnight and said a further cut is possible, while Rio Tinto was placed under 'creditwatch negative'.

Midcap oil and gas explorer Tullow Oil (down 7.48%), oilfield services firms Weir Group (down 8.70%) and Amec Foster Wheeler (down 6.21%) led the FTSE 250 fallers’ roster.

Away from resource stocks, Prudential (down 8.22%) fell on headlines that China is unleashing new steps to control financial risks and outflows. Bloomberg reported that the currency regulator is imposing restrictions on buying insurance products overseas, specifically a $5,000 cap on insurance products paid for using UnionPay debit and credit cards.

On a more positive note, supermarket Sainsbury’s (up 2.41%) advanced after agreeing a deal to buy Home Retail for about £1.3bn. Associated British Foods (up 1.59%), another retailer and owner of Primark, was also among the blue chip gainers.

Finally, Ocado Group (down 6.87%) plunged despite reporting double-digit revenue growth for the year. Steve Clayton, head of equity research at Hargreaves Lansdown said, “The company has been unable to persuade customers to pay the full cost of delivery and has so far not been able to sign multiple deals.”

“If Ocado do end up signing multiple deals in multiple territories then Ocado’s shares could well have real potential in the years ahead. But that will be a long haul.”