London close: Equities slip on China, oil prices and geopolitical woes

Global equities ruptured after trading was suspended in mainland China following a 7% fall in the CSI 300 index. It triggered the nation’s ‘circuit breaker’ rule, designed to stop panic selling, and came after 30 minutes to mark the shortest trading day on record.

However, the Shenzhen and Shanghai stock exchanges will suspend the rule as of Friday.

“To maintain the smooth operation of the stock market, as approved by the China Securities Regulatory Commission, the Shanghai Stock Exchange has decided to suspend the circuit-breaker mechanism,” the Shanghai bourse said in a statement.

The new circuit breakers, which kicked in on Monday, have been criticised by analysts for exaggerating declines as investors rush to exit positions before getting locked in by the halts.

Meanwhile, investors are concerned about a weakening yuan after the People’s Bank of China allowed the biggest fall in the currency in five months on Thursday. The central bank set the official midpoint rate on the yuan 0.5% weaker at 6.5646 per dollar, the lowest since March 2011.

The World Bank cut its outlook for Chinese growth in 2016 to 6.7% from 7% in June and said it now expects Brazil and China’s economies to contract 2.5% and 0.7%, respectively. The Bank also slashed its global economic growth forecast for this year to 2.9% from a 3.3% estimate in June, pointing to weak growth in major emerging markets.

The market was also being weighed down by a continued drop in oil prices on Thursday. At 1635 GMT Brent recovered slightly from lows earlier in the session, rising 0.23% to $34.31 per barrel, while West Texas fell 0.26% to $33.64 per barrel.

As of 17:21GMT Fed funds futures were pegging the chances of a March 2016 interest rate hike by the US Federal Reserve at 41% and at 63.5% for June, according to Bloomberg data.

FXTM Research Analyst Lukman Otunuga said the rising tensions between Iran and Saudi Arabia has sabotaged any hopes that OPEC members may agree on a production cut.

In the latest row between the two, Iran has accused Saudi Arabia of launching an air strike on its embassy in the Yemeni capital of Sana’a. Iran's government has said it will no longer allow imports from Saudi Arabia following a cabinet meeting chaired by President Hassan Rouhani on Thursday morning, state news agency IRNA reported.

Economic data

German factory orders rose 2.1% in November compared to a year ago, beating expectations for a 1.1% increase, data from the Economy Ministry in Berlin showed.

German retail gained 2.3% year-on-year in November, trailing estimates for a 3.7% jump, according to Destatis.

UK house prices rose more than forecast in December, rising 1.7% from a month ago, compared to estimates of 0.5%, according to Halifax.

Eurozone retail sales in November were down a seasonally-adjusted 0.3% compared with a 0.2% drop the previous month, missing economists' expectations for a 0.2% increase, Eurostat revealed.

The unemployment rate in the Eurozone fell to its lowest level in November since October 2011, Eurostat said separately. The jobless rate dropped to 10.5% from 10.6% in October and 11.5% in the same month of 2014, beating economists’ expectations for a rate of 10.7%.

Another report from Eurostat showed Eurozone economic confidence unexpectedly improved in December.

The headline Eurozone sentiment index for December rose to 106.8, from the previous month's 106.1 and ahead of consensus estimates of 106. Eurozone consumer confidence was at -5.7, up from -5.9 the previous month and estimates for the same, while the business climate indicator rose to 0.41, above November's 0.36 and forecasts for 0.39.

In the US, initial weekly unemployment claims fell by 10,000 over the week to 2 January to 277,000, according to the US Department of Labor. Economists had pencilled in a slightly larger drop to 275,000. The reading for the previous week was unrevised at 278,000.

Elsewhere in the US, Richmond Fed’s Jeffrey M. Lacker tried to soothe concerns on Thursday by saying that inflation was likely to move back towards the Fed’s target in the near term. "After the price of oil bottoms out, I would expect to see headline inflation move significantly higher," Lacker said in a speech to the Chamber of Commerce in Raleigh.

Fed policymaker Charles Evans is due to speak at 1915 GMT on the economy and monetary policy in Madison.

Corporate stocks

Mining stocks declined, including Anglo American, Glencore and Antofagasta, on concerns over China.

Oil and gas stocks were under the cosh, including Royal Dutch Shell, BP, Ophir Energy and Nostrum Oil & Gas, on the oil price slump.

Aberdeen Asset Management dropped after it went ex-dividend today, compounded by the fall in global markets. China’s woes also had an impact on the stock, which revealed in November its full year underlying pre-tax profits were flat due to the slump in Asian and emerging market equities last year.

Home Retail gained on reports that former Tesco boss Sir Terry Leahy and US private equity firm Clayton Dubilier & Rice are reportedly mulling a possible bid to rival Sainsbury’s.

Poundland fell after it said that disastrous trading conditions in November continued through the third quarter.

OneSavings Bank rallied after Investec upgraded it from ‘hold’ to ‘buy’, and highlighted the "clear value" in the stock after the shares' 18% fall since mid-December.

Market Movers

FTSE 100 (UKX) 5,951.28 -2.01%
FTSE 250 (MCX) 16,779.66 -1.64%
techMARK (TASX) 3,149.11 -1.68%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 4,403.00p 1.73%
Next (NXT) 6,915.00p 0.73%
National Grid (NG.) 949.80p -0.02%
Marks & Spencer Group (MKS) 438.60p -0.02%
Persimmon (PSN) 1,962.00p -0.15%
Relx plc (REL) 1,166.00p -0.17%
ITV (ITV) 268.00p -0.30%
Severn Trent (SVT) 2,144.00p -0.37%
Babcock International Group (BAB) 967.00p -0.41%
Inmarsat (ISAT) 1,105.00p -0.54%

FTSE 100 - Fallers

Anglo American (AAL) 240.30p -11.13%
Glencore (GLEN) 78.71p -8.32%
Aberdeen Asset Management (ADN) 249.70p -7.52%
Antofagasta (ANTO) 409.40p -5.60%
easyJet (EZJ) 1,667.00p -5.18%
BHP Billiton (BLT) 673.90p -5.00%
Hargreaves Lansdown (HL.) 1,415.00p -4.46%
Wolseley (WOS) 3,444.00p -4.15%
Sports Direct International (SPD) 512.00p -3.94%
GKN (GKN) 274.80p -3.65%

FTSE 250 - Risers

Acacia Mining (ACA) 189.50p 4.52%
OneSavings Bank (OSB) 321.50p 3.68%
Home Retail Group (HOME) 136.80p 3.32%
Supergroup (SGP) 1,539.00p 2.40%
Enterprise Inns (ETI) 107.90p 1.22%
JD Sports Fashion (JD.) 1,044.00p 1.16%
Ocado Group (OCDO) 292.20p 1.00%
Berendsen (BRSN) 1,069.00p 0.94%
Grafton Group Units (GFTU) 732.00p 0.90%
Rank Group (RNK) 285.30p 0.81%

FTSE 250 - Fallers

Poundland Group (PLND) 168.10p -12.45%
Vedanta Resources (VED) 238.30p -8.42%
Amec Foster Wheeler (AMFW) 395.70p -7.05%
B&M European Value Retail S.A. (DI) (BME) 248.90p -6.67%
Entertainment One Limited (ETO) 162.80p -6.65%
Evraz (EVR) 67.30p -5.28%
Paragon Group Of Companies (PAG) 331.00p -5.16%
Indivior (INDV) 177.10p -5.09%
Nostrum Oil & Gas (NOG) 360.70p -4.70%
Workspace Group (WKP) 925.00p -4.69%