Sector Movers: Resource stocks recover on base metal, oil futures uptick

Resource stocks headed higher on Wednesday following a recovery in base metal and oil futures prices.

At the close of proceedings, the FTSE 100 ended 0.34% or 20.88 points lower at 6146.32, while the FTSE 250 ended 0.37% or 62.42 points lower at 16,591.61. At 1728 GMT, the Brent front month futures contract was up 3.13% or $1.24 to $40.89 per barrel having risen to $41 intraday, before retreating. Concurrently, WTI futures rose 3.86% or $1.41 to $37.91 per barrel.

US government data showed the country’s crude stockpiles rose in line with analysts’ expectations. Stocks increased 3.9m barrels to a total 521.9m barrels in the week to 4 March, according to the Energy Information Administration.

Total motor gasoline stockpiles fell 4.5m barrels and while distillate fuel stocks dropped 1.1m barrels. Production figures were broadly unchanged.

IG’s senior market analyst Chris Beauchamp said, “Oil inventories were up again, while production flatlined, but markets opted to just look at the drawdown in gasoline stockpiles. Cherry picking of data has long been a theme in stock markets, but now commodities appear to be playing along too.”

Away from oil markets, precious metals headed lower. The COMEX gold April futures contract fell 0.67% or $8.50 to $1254.40 an ounce, while spot gold was down 0.52% or $6.51 to $1,254.93 an ounce.

COMEX silver fell 0.10% or a cent to $15.38 an ounce, and spot platinum also slid 0.17% or $1.67 to $981.51 an ounce, retreating below the psychological $1,000 an ounce level that it breached on Monday for the first time since October 2015.

However, headline base metal futures headed higher across the London Metal Exchange board. At 1635 GMT, three-month futures contracts of primary aluminium (+0.5%), nickel (+1.1%), lead (+1.5%), tin (+0.9%), zinc (+1.8%) and copper (+1.7%) were all on positive turf.

Predictably, Glencore (+2.90%) reversed the previous session’s losses to end the trading day among the FTSE 100’s biggest gainers, with Royal Dutch Shell ‘A’ shares (+1.84%) in close attendance. Concurrently, Cairn Energy (+13.27%) and Tullow Oil (+3.54%) led the FTSE 250 gainers.

Additionally, Cairn Energy said it was "delighted" with the results of a second successful test well out of three drilled offshore Senegal, with oil flowing at rates that bode well for the wider field.

Oil from the SNE-3 appraisal well flowed at a maximum rate of 5,400 oil barrels per day, with a second well gushing at around 5,200 bpd.

Drill stem test results confirmed similar reservoir quality and correlation of the principal reservoir units between SNE-1, SNE-2 and SNE-3, with 144 metres of continuous core taken across the entire reservoir interval with 100% recovery.

Not all resource stocks had a good day with Vedanta Resources (-5.32%) still feeling the effects of a Moody’s downgrade earlier in the week. Away from resource stocks, Prudential (+2.90%) was the biggest blue chip gainer of the session after it posted an annual pre-tax profit of £4bn, up 22% on the previous year, boosted by strong performances at its UK, US and Asian life insurance businesses.

Energy utility SSE (+2.30%) advanced after JPMorgan lifted its rating on the utility to ‘overweight’ from ‘underweight’ and upped the price target to 1,550p from 1,280p. Ashtead slumped after Credit Suisse downgraded the stock to ‘underperform’ from ‘outperform’ and slashed the price target to 770p from 1,300p.

Banking and financial stocks had a relatively poor session with Standard Chartered (-2.29%), Barclays (-2.21%) and Aberdeen Asset Management (-1.89%) all ending up among the FTSE 100’s biggest fallers.

Finally, shares in Burberry (-6.70%) fell sharply following a report that the ‘mystery investor’ who had built up a greater than 5.0% stake in the company’s stock was in fact the result of a series of trading positions taken on by HSBC.

The report, referencing a Bloomberg article which cited ‘sources’ sent shares in the iconic fashion retailer down by 6.02% to 1,374p. On 8 March, the Financial Times reported the company had gone as far as asking its advisers at Robey Warshaw to help it prepare against a possible bid.

HSBC, the custodian for the shares held as part of that stake, reportedly refused to identify the client on whose behalf it was holding those shares.