London close: Oil price slump drags FTSE lower

Oil prices were under pressure as concerns on the global oversupply and a stronger dollar weighed. Morgan Stanley said the global oil market was “severely oversupplied” with gasoline and headwinds were growing for the second half of the year, leading to expectations of lower oil prices.

At 1616 BST Brent crude fell 1.8% to $44.85 per barrel and West Texas Intermediate dropped 2.07% to $43.29 per barrel.

Shares in oil giants Royal Dutch Shell, BP and BHP Billion slid.

Meanwhile, investors showed caution ahead of policy decisions from the Federal Reserve and the Bank of Japan later in the week.

The Fed is widely expected to keep interest rates unchanged on Wednesday but the market will be looking for clues on the timing of the next hike. Economists predict the central bank will follow the lead from the Bank of England and the European Central Bank in citing Brexit and the lack of economic data for standing pat on policy.

The BoJ, on the other hand, is expected to loosen monetary policy to boost Japan’s economy on Friday.

“The stand out central bank decision is the Bank of Japan, with high expectations in the markets that a new round of monetary stimulus will be launched,” said Craig Erlam, senior market analyst at Oanda.

“It was thought that the BoJ was exploring the idea of helicopter money, something that was firmly denied in an interview with Governor Haruhiko Kuroda last week, which took the edge off the yen weakness from the last couple of weeks. This was partially undone by the revelation that the interview was conducted in June, although it’s unlikely that his view has changed significantly since then.”

On this side of the pond, a survey showed optimism among UK manufacturers has fallen sharply in the wake of Britain's vote to leave the European Union on 24 June. The Confederation of British Industry’s latest quarterly survey revealed the business confidence index dropped to -47 from -5 in April, exceeding the -15 reading expected by analysts.

German business confidence for July came in stronger than expected, according to the IFO Institute. The business climate index came in at 108.3, down from 108.7 the previous month but comfortably ahead of economists’ expectations for a reading of 107.5.

In company news, 3i Group shares jumped after Barclays Capital upped its price target to 680p, with a potential upside of 0.13%.

Randgold Resources shares declined as it downgraded its full year targets due to hiccups at its Tongon mine in Cote D'Ivoire. Fellow miners Fresnillo and Rio Tinto were also lower as metal prices dropped.

William Hill was racing higher after Rank Group and 888 Holdings made a preliminary approach regarding a potential £3bn takeover for the struggling high street bookmaker.

Beazley was also on the rise as Canaccord Genuity reiterated a ‘buy’ rating and raised its target price to 450p from 415p after the insurer reported its half year results.

Market Movers

FTSE 100 (UKX) 6,705.84 -0.37%
FTSE 250 (MCX) 17,063.71 0.47%
techMARK (TASX) 3,414.70 0.03%

FTSE 100 - Risers

3i Group (III) 610.50p 3.30%
Next (NXT) 5,005.00p 2.73%
Morrison (Wm) Supermarkets (MRW) 183.80p 2.17%
Legal & General Group (LGEN) 199.40p 2.05%
St James's Place (STJ) 888.00p 2.01%
Admiral Group (ADM) 2,139.00p 1.95%
Barratt Developments (BDEV) 419.00p 1.95%
Ashtead Group (AHT) 1,192.00p 1.88%
Persimmon (PSN) 1,628.00p 1.88%
GKN (GKN) 289.90p 1.86%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 8,550.00p -3.39%
BP (BP.) 440.35p -2.60%
Royal Dutch Shell 'A' (RDSA) 2,038.50p -2.56%
Royal Dutch Shell 'B' (RDSB) 2,093.50p -2.54%
Fresnillo (FRES) 1,801.00p -1.64%
Mediclinic International (MDC) 1,083.00p -1.28%
Lloyds Banking Group (LLOY) 53.80p -1.27%
TUI AG Reg Shs (DI) (TUI) 911.00p -1.09%
Shire Plc (SHP) 4,870.00p -0.90%
Associated British Foods (ABF) 2,711.00p -0.88%

FTSE 250 - Risers

IP Group (IPO) 161.20p 5.64%
Daejan Holdings (DJAN) 5,505.00p 5.16%
William Hill (WMH) 328.80p 4.85%
Shawbrook Group (SHAW) 175.40p 4.72%
McCarthy & Stone (MCS) 164.40p 3.85%
CYBG (CYBG) 250.90p 3.85%
Restaurant Group (RTN) 328.50p 3.53%
Galliford Try (GFRD) 976.00p 3.44%
Beazley (BEZ) 403.10p 3.44%
Softcat (SCT) 343.00p 3.06%

FTSE 250 - Fallers

Cairn Energy (CNE) 175.80p -7.18%
Tullow Oil (TLW) 200.60p -5.42%
Centamin (DI) (CEY) 151.30p -4.72%
Amec Foster Wheeler (AMFW) 454.30p -4.26%
Vectura Group (VEC) 149.60p -3.73%
Petrofac Ltd. (PFC) 763.00p -3.60%
Vedanta Resources (VED) 534.50p -2.64%
BTG (BTG) 656.00p -2.60%
Vesuvius (VSVS) 331.20p -2.53%
Acacia Mining (ACA) 545.00p -2.50%