Sector movers: Oil drop pummels resource stocks

Resource stocks saw another familiar drop on Monday following a slump in oil prices and concerns over lacklustre global demand for key commodities.

The FTSE 100 ended 0.69% or 40.61 points lower at 5,871.83, while the FTSE 250 finished 0.44% or 74.34 points lower at 16,658.32. The WTI front-month futures contract fell to a fresh 12-year low as oversupply concerns continued to dominate market chatter.

At 1715 GMT, the US benchmark was down 4.58% or $1.52 at $31.64 per barrel, heading towards another record intra-session decline in wake of the oil supply glut. Concurrently, Brent was also down a record 5.31% or $1.78 at $31.77 per barrel.

Earlier in the European session, analysts at Societe Generale lowered their price forecast for the Brent front-month contract from $53.75 per barrel to $42.50. More specifically, and for each of the four quarters of 2016, the French investment bank's analysts forecast Brent futures to trade around $35, $40, $45 and $50, from first to fourth quarter.

Base metal futures also fell across the London Metal Exchange board following further declines in Asia, with China’s headline producer prices staying unchanged for December at -5.9%, according to the country’s National Bureau of Statistics.

Unsurprisingly, three-month delivery contracts of copper (down 2.3%), nickel (down 1.3%), lead (down 2.6%), zinc (down 2.4%) and tin (down 0.7%) extended the previous session’s losses in late afternoon trading, while primary aluminium futures escaped a drop by posting a nominal uptick of 0.3%.

It meant recourse stocks took another pounding from short-sellers. Glencore (down 5.23%), Antofagasta (down 2.66%) and BHP Billiton (down 2.45%) were among the biggest FTSE 100 fallers, while FTSE 250 companies Vedanta Resources (down 8.34%) and Tullow Oil (down 4.46%) were seen dragging the midcaps lower.

However, blue chip miner Anglo American rallied on news it is poised to begin the sale of its Brazilian niobium and phosphate business. Elsewhere, Savills (up 3.31%) jumped after the real estate firm said underlying full-year results will be ahead of previous expectations boosted by its investment management business although it warned that global economic uncertainty and rising interest rates would result in a “tempering” of transaction volumes.

Finally, Sage (up 1.82%) rose after Bank of America Merrill Lynch upgraded the stock to ‘buy’ from ‘underperform’ and lifted the price target to 660p from 400p.