Sector Movers: Resource stocks continue to drag London market lower

Resource stocks slipped further on Wednesday, dragging the London market further into negative territory.

The FTSE 100 closed 1.60% or 95.13 points lower at 5,867.18, while the FTSE 250 ended 0.69% or 111.70 points lower at 16,117.50. Oil futures stemmed declines, as US crude inventory data served as a counterweight to Saudi Oil Minister Ali Al-Naimi’s recent observation of there being no prospect of production cuts.

Brent and WTI April futures rose as US Department of Energy’s statistical arm – the Energy Information Administration – noted that the country's gasoline inventories fell last week, for the first time since November.

Headline EIA data pointed to an increase of 3.5m barrels in the last week to a total of 507.6m, compared with analysts' expectations for an increase of 3.4m barrels. Gasoline stocks fell by 2.2m barrels, compared with analysts' expectations for a 1 to 1.1m barrels drop.

However, crude stocks at the US oil delivery hub of Cushing, Oklahoma, rose by 333,000 barrels, the EIA added. At 1915 GMT, the Brent was up 2.95% or 98 cents to $34.25 per barrel, while WTI was 0.44% or 14 cents higher at $32.01 per barrel.

Speaking at IHS CERA Week in Houston, USA on Tuesday, Al-Naimi restated Saudi Arabia's case for “maintaining output” premised on demand picking up excess crude over the medium-term.

Elsewhere, Fitch Ratings lowered oil price assumptions it uses to rate energy companies, reflecting its view that prices were “increasingly unlikely” to recover this year.

In a note to clients, the ratings agency said its new base case is for Brent and WTI oil prices to average $35 per barrel in 2016. It had previously expected oil to average $45. However, Fitch’s long-term base case price assumptions remain unchanged at $65.

Away from oil markets, precious metals continued to post upticks. The COMEX front-month gold futures contract was up 1.77% or $21.60 at $1,244.20 an ounce, while spot gold was up 0.80% or $9.80 to $1,236.65 an ounce. COMEX silver rose 0.88% or 14 cents to $15.42 an ounce, but spot platinum fell 0.41% or $3.87 to $940.63 an ounce.

Headline base metal futures saw a mixed afternoon on the London Metal Exchange. At 1635 GMT, three-month futures contracts of nickel (down 0.6%), lead (down 0.8%) and tin (down 0.2%) headed lower, but copper (up 0.1%) and primary aluminium (up 1.2%) headed higher.

Predictably, gold miners Randgold Resources (up 1.99%) and Fresnillo (up 1.69%) were among the biggest gainers on the FTSE 100. However, Glencore (down 10.12%), Anglo American (down 9.57%), BHP Billiton (down 8.38%) and Rio Tinto (down 5.73%) were among the biggest blue chip fallers of the session.

Midcap oilfield services firms had a mixed afternoon as Petrofac (up 4.78%) rose but rival Amec Foster Wheeler (down 8.95%) headed lower. Away from resource stocks, shares in housebuilder Barratt Developments jumped after it hiked its dividend by a quarter and said profits mushroomed in the first half of the year.

Rival Persimmon also continued to rally after reporting healthy full year results as UBS upgraded the stock to ‘buy’ from ‘neutral’ and raised the price target to 2,330p from 2,135p.

Among financial and banking stocks, Man Group edged lower after reporting a 20.25% fall in adjusted pre-tax profit for the full year. Meanwhile, Standard Chartered continued to tumble a day after reporting disappointing full year results as Bank of America Merrill Lynch downgraded its stock to ‘neutral’ from ‘buy’ and slashed the price target to 475p from 650p.