London close: Stocks end lower as oil prices slide, pound rises

“The thrust of the afternoon’s momentum seemed to come from two sources; the decline from Brent Crude and the dismal state of the ISM services PMI,” said Connor Campbell, financial analyst at Spreadex.

Oil prices declined as traders seemed unconvinced by Russia and Saudi Arabia's vague promise on Monday of greater cooperation to stabilise the market.

Brent crude dropped 2.07% to $46.66 per barrel and West Texas Intermediate fell 2.2% to $44.19 per barrel at 1629 BST.

“Oil has been in the spotlight again over the last 24 hours having rallied more than 5% at one point yesterday when a press conference was called for the Saudi Arabia and Russian oil ministers,” said Craig Erlam, senior market analyst at Oanda.

“The unexpected announcement sparked a sudden belief that a coordinated output freeze may be about to be announced but once again we were left listening to fluffy commitments to cooperation between the two oil producing giants.”

Meanwhile, the dollar fell against the pound after figures from the Institute for Supply Management showed growth in the US economy’s services sector slipped more than expected in August. The ISM services index fell to 51.4 in August from 55.5 the month before, missing expectations for a reading of 55.0 and hitting its lowest level since February 2010. A reading above 50 indicates expansion.

Rob Martin at Barclays Research, said: "Although still a weak number and still consistent with softer services sector growth, the stability in those reporting lower activity is reassuring. In the run-up to the past two recessions, firms seeing lower activity drove the change in the index. Labour demand in the service sector has yet to bounce back meaningfully from its year-to-date softness.”

On this side of the pond, the British Retail Consortium revealed UK retail spending fell 0.3% in August compared to the same month a year ago, down from a 1.9% jump in July. On a like-for-like basis, excluding changes in the amount of retail space open to shoppers over the past year, sales dropped 0.9% year-on-year following a 1.1% rise in July.

“August’s BRC report shows that consumer spending is not as resilient to the consequences of the Brexit vote as July’s official retail sales figures implied,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“Growth in retail sales likely will pick up again in the near-term, but we expect a fundamental slowdown in volumes growth next year, when retailers will pass on the rise in import prices to consumers in earnest and firms will still be holding back from hiring due to uncertainty about the UK’s future trading relationships.”

In the Eurozone, gross domestic product growth for the second quarter was confirmed by Eurostat at 0.3% quarter-on-quarter, compared to 0.5% in the first quarter.

German factory orders fell 0.7% in July compared to a year ago, more than the 0.2% drop expected and following a 3% decrease in June, Destatis revealed.

Looking ahead, Bank of England Governor Mark Carney's testimony before the Treasury Select Committee on Wednesday will be in focus. Lawmakers will likely question Carney over his recent stimulus boost and his thoughts on the implications of Brexit.

On the company front, Berkeley led housebuilder shares higher after saying the property market in August stabilised after a jump in cancellations in the wake of Brexit. Berkeley, which is set to fall out of London’s FTSE 100 next week after just one year, said it was on track to deliver £2bn in profits over the three years to April 2018.

Sector peer Redrow also rallied as it reported a 23% rise in pre-tax profits to £250m in the year to 30 June and a 17% increase in legal completions, supported by the government’s Help to Buy scheme.

easyJet flew higher as it increased passenger numbers by 6.4% in August, compared to the same month the previous year.

On the downside, Standard Chartered’s shares slumped after Barclays downgraded the stock to ‘underweight’ from ‘equalweight’, saying the valuation is overshooting its earnings power, but lifted the price target to 520p from 500p.

The downgrade hurt sentiment in the rest of the sector, sending down shares in Lloyds Banking Group, HSBC and Barclays.

Market Movers

FTSE 100 (UKX) 6,826.05 -0.78%
FTSE 250 (MCX) 18,003.44 -0.12%
techMARK (TASX) 3,454.20 -0.49%

FTSE 100 - Risers

Berkeley Group Holdings (The) (BKG) 2,783.00p 3.46%
Mondi (MNDI) 1,602.00p 2.76%
Persimmon (PSN) 1,870.00p 1.74%
Barratt Developments (BDEV) 507.00p 1.73%
International Consolidated Airlines Group SA (CDI) (IAG) 398.90p 1.68%
easyJet (EZJ) 1,150.00p 1.68%
Anglo American (AAL) 826.80p 1.57%
Fresnillo (FRES) 1,695.00p 1.32%
Taylor Wimpey (TW.) 163.60p 1.30%
United Utilities Group (UU.) 1,004.00p 1.16%

FTSE 100 - Fallers

Standard Chartered (STAN) 639.00p -2.96%
Lloyds Banking Group (LLOY) 58.08p -2.63%
HSBC Holdings (HSBA) 568.50p -2.25%
Paddy Power Betfair (PPB) 8,985.00p -2.18%
Barclays (BARC) 169.70p -2.05%
Royal Dutch Shell 'B' (RDSB) 1,937.00p -1.80%
Carnival (CCL) 3,440.00p -1.77%
Standard Life (SL.) 361.50p -1.77%
Royal Dutch Shell 'A' (RDSA) 1,857.50p -1.75%
BP (BP.) 427.65p -1.64%

FTSE 250 - Risers

Redrow (RDW) 416.30p 8.33%
Sports Direct International (SPD) 349.60p 5.21%
Ascential (ASCL) 265.60p 4.16%
Thomas Cook Group (TCG) 74.80p 3.60%
Crest Nicholson Holdings (CRST) 489.20p 3.05%
Debenhams (DEB) 62.75p 2.95%
Renishaw (RSW) 2,720.00p 2.95%
Circassia Pharmaceuticals (CIR) 94.90p 2.04%
Bellway (BWY) 2,392.00p 1.96%
Kaz Minerals (KAZ) 185.60p 1.92%

FTSE 250 - Fallers

Grainger (GRI) 226.80p -3.78%
Sophos Group (SOPH) 247.70p -3.54%
Amec Foster Wheeler (AMFW) 567.50p -3.24%
Petrofac Ltd. (PFC) 819.50p -2.73%
DFS Furniture (DFS) 265.80p -2.49%
ICAP (IAP) 470.60p -2.28%
IP Group (IPO) 188.90p -2.28%
Tullow Oil (TLW) 226.90p -2.24%
Spire Healthcare Group (SPI) 361.20p -2.17%
Computacenter (CCC) 727.00p -2.15%