Sector Movers: Resource, banking stocks tumble
Resource and banking stocks registered declines on Thursday, with both London indices ending the session on a lacklustre note.
At the close of proceedings, the FTSE 100 ended 0.97% or 58.37 points lower at 5971.95, while the FTSE 250 ended 0.13% or 20.42 points higher at 16,176.75. Oil futures headed sideways on Thursday, after substantial spikes over the previous session, premised on a call by major producers to freeze production, fizzled out with Iran still not clarifying its stance on whether or not it would back a Saudi-Russian initiative.
The Saudi-Russian move, announced on Tuesday, is aimed at capping oil production at their respective January output levels. The first such instance of OPEC and non-OPEC cooperation on oil production for 15 years is also backed by Venezuela and Qatar.
Iraq’s oil ministry has come out in favour of the move as well, but is yet to formally clarify its own response. At 1656 GMT, the Brent front-month oil futures contract was down 0.23% or eight cents at $34.42 per barrel, having registered a spike of above 7% overnight.
The WTI contract was fairing marginally better up 0.36% or 11 cents at $30.77 per barrel, as traders contemplated booking profits, with little movement from Iran and the wider market still awash with crude.
Meanwhile, precious metals remained on positive turf posting modest gains. The COMEX front-month gold futures contract was up 0.68% or $8.20 at $1,219.60 an ounce, while spot gold was up 1.03% or $12.40 to $1,220.90 an ounce. COMEX silver rose 0.15% or two cents to $15.40 an ounce, however spot platinum fell a nominal 0.12% or $1.10 to $941.45 an ounce.
Selected base metal futures were marginally in positive territory on the London Metal Exchange. At 1635 GMT, three-month futures contracts of tin (up 0.1%), nickel (up 0.2%) and copper (up 0.1%) rose, but lead (down 1.2%) and primary aluminium (down 0.1%) futures posted declines.
Many of the resource stocks that led the market higher overnight faltered. Anglo American (down 7.70%) was the biggest FTSE 100 faller with Royal Dutch Shell ('a' shares down 3.23%) in the red as well. The latter was also clobbered by an afterhours downgrade from Fitch Ratings.
The ratings agency lowered Shell's long-term Issuer Default Rating (LT IDR) to 'AA-' from 'AA' with a ‘Negative’ outlook. Fitch added that its ‘Negative’ outlook for the company reflects risks stemming from Shell materially missing the targeted level of asset disposals in a competitive market environment, expectations of fairly stable dividend payouts, increase in leverage due to recurring negative free cash flow (FCF), lower oil prices and weaker cash generation.
“In this oil price environment, the expected improvement to Shell's upstream profile post-BG acquisition does not, in our view, fully offset the forecast deterioration of its credit metrics, as the group's higher post-acquisition leverage exceeds our negative rating action trigger of above 1.5x on a sustained basis,” the agency concluded.
On the FTSE 250, Tullow Oil (down 11.29%), Petrofac (down 5.04%) and Amec Foster Wheeler (down 4.33%) saw sizeable declines. Tullow also said it had identified a potential issue with the turret bearing on the vessel serving its Jubilee field offshore Ghana.
Away from resource stocks, Asia-focussed Standard Chartered (down 5.48%) bank and Barclays (down 3.81%) also found themselves on the blue chip losers' roster.
However, on more positive note, British Gas owner Centrica (up 6.85%) led the FTSE 100 gainers after it reported full year results that beat market expectations. Finally, housebuilders also had a positive session with Persimmon (up 2.35%), Berkeley Group (up 2.15%) and Barratt Developments (up 2.01%) ending the session higher.