London close: Stocks mixed as Biden's oil release does little to prices
London stocks closed in a mixed state on Tuesday, as the latest PMIs reinforced expectations of a rate hike next month, and the White House confirmed it was leading a coordinated release of oil reserves in a bid to suppress rising energy prices.
The FTSE 100 ended the session up 0.15% at 7,266.69, while the FTSE 250 fell 0.89% to 23,221.61.
Sterling was below the waterline as well, last trading down 0.15% on the dollar at $1.3377, and losing 0.42% against the euro to €1.1874.
“Joe Biden’s grandiose plans to drive down energy prices appears to have fallen by the wayside today, with an unprecedented move to release oil reserves alongside a host of Asian nations doing little to help drive down prices this afternoon,” said IG senior market analyst Joshua Mahony.
“Today’s rise in crude oil prices does highlight the fact that governments are struggling to actually lift production to a level that would balance the market, with an emergency release of reserves seen as an unsustainable way to drive down prices.
“While Joe Biden will know that higher fuel costs are intrinsically linked with his declining approval ratings, today highlights how his lack of support for higher oil & gas exploration could come at a cost in the polls.”
Indeed, the Biden administration announced it was preparing to release 50 million barrels of crude oil in a first-time coordinated effort between countries to push gasoline prices lower.
It came after repeated announcements from the White House that it was considering its entire range of available tools to combat petrol prices that recently reached seven-year highs in the United States.
According to CNBC, Washington was set to release 50 million barrels of crude from its Strategic Petroleum Reserve, with China, India, Japan, South Korea and the United Kingdom agreeing to make similar releases.
“The President stands ready to take additional action, if needed, and is prepared to use his full authorities working in coordination with the rest of the world to maintain adequate supply as we exit the pandemic,” the White House said in a statement on Tuesday.
A total of 32 million barrels would be released in exchange over the next few months, while the remaining 18 million barrels were a hastening of a previously-agreed sale.
Oil prices were on the rise at the end of the European day, with Brent crude futures last up 3.04% at $82.12 per barrel, and West Texas Intermediate ahead 2.33% at $78.54.
On home shores, consumer demand jumped alongside surging input costs in November according to a closely-watched survey, fuelling expectations that the Bank of England could put rates up next month.
The flash IHS Markit/CIPS UK composite output index was 57.7 in November, marginally down on October’s 57.8 but otherwise above the third-quarter average of 56.3.
It also beat consensus forecasts for 57.5.
Within that, the UK services business activity index was 58.6, compared to 59.1 in October, while the manufacturing output Index rose to 52.9 from 51.3 a month previously.
“A combination of sustained buoyant business growth, further job market gains and record inflationary pressures gives a green light for interest rate rises in December,” said Chris Williamson, chief business economist at IHS Markit.
“Output growth across manufacturing and services came in slightly faster than expected in November, albeit heavily skewed towards the service sector as factories continue to struggle with supply shortages and falling exports.
“A record interest in firms’ costs will further stock fears that inflation will soon breach 5%, with lingering near-record supply delays adding to indications that price pressures may show few signs of abating in the near term.”
Finally, official data released earlier showed the number of homes sold in the UK tumbling by more than half last month.
According to HM Revenue & Customs, the provisional seasonally-adjusted estimate of UK residential transactions in October was 76,930.
That was a 28.2% fall over October 2020 and a 52% drop on September, when the stamp duty holiday finally ended.
In contrast, non-residential transactions rose on the same basis to 10,160, a 10.4% annual jump and 1% higher month-on-month.
“Property transactions have halved in a month, coinciding with the removal of the final stamp duty discount, and this will undoubtedly mark the resumption of lower sales volumes moving forward,” said Paul Stockwell, chief commercial officer at Gatehouse Bank.
“Transactions plummeted similarly after June’s deadline, so it’s not surprising.
“House sales will likely return to the historical norms before the pandemic, as the cost of moving becomes a factor again.”
In equities, online electrical retailer AO World tumbled 14.35% after it warned that supply chain issues and higher costs would hit full-year earnings and revenue.
“The company is currently in a parlous position,” said Richard Hunter, head of markets at Interactive Investor.
“The well-publicised supply chain disruptions have had a severe impact, with a shortage of delivery drivers a particular issue.
“At the same time, the group’s foray into the German market is not only in the early stages of establishing the brand, but is also being faced by significantly increased competition.”
Newspaper publisher Reach lost 7.62% despite saying trading was ahead of expectations, driven by a rise in customer registrations for its websites.
Elsewhere, safety equipment manufacturer Halma slid 5.71%, while online grocer and warehouse technology outfit Ocado reversed earlier losses to close flat.
Housebuilders were mostly on the positive side of the ledger, meanwhile, with Barratt Developments jumping 2.45% after Berenberg lifted the shares to ‘buy’ from ‘hold’.
“The UK housebuilding sector just cannot seem to catch a break - despite a booming housing market, the sector has underperformed the UK market by 10% year-to-date,” the analyst said
“Demand remains high, pricing continues to offset costs, balance sheets are as strong as they have ever been, valuations are cheap and forecasts achievable, so we are confident that - despite rising rates - this underperformance will reverse.”
Among its peers, Berkeley Group eked out gains of 0.16%, and Taylor Wimpey was ahead 0.7% by the end of trading.
Building materials group CRH was up 3.45% after saying it was on track to deliver "another record performance" for the full year.
Railway and airport caterer Compass Group rallied 5.7% after saying it was reinstating its dividend and that full-year pre-tax profits had more than doubled.
Utility Warehouse owner Telecom Plus rocketed 15.59% after it reported a drop in half-year profit but a 6% jump in revenue thanks in part to a colder spring relative to the prior year.
Pets at Home advanced 5.54% after it backed its full-year profit guidance as it posted a jump in interim profit and revenue, highlighting a rise in pet ownership.
Heat treatment specialist Bodycote was up 3.77%, even after it warned that full-year revenues would be lower due to supply chain bottlenecks in the automotive industry.
Market Movers
FTSE 100 (UKX) 7,266.69 0.15%
FTSE 250 (MCX) 23,221.61 -0.89%
techMARK (TASX) 4,490.17 -1.10%
FTSE 100 - Risers
Compass Group (CPG) 1,558.00p 5.81%
CRH (CDI) (CRH) 3,787.00p 3.45%
BHP Group (BHP) 2,001.00p 3.00%
Rio Tinto (RIO) 4,670.50p 2.89%
Barratt Developments (BDEV) 702.20p 2.45%
International Consolidated Airlines Group SA (CDI) (IAG) 151.46p 2.24%
Associated British Foods (ABF) 1,956.00p 1.61%
BP (BP.) 339.40p 1.50%
Royal Dutch Shell 'A' (RDSA) 1,638.20p 1.41%
Royal Dutch Shell 'B' (RDSB) 1,638.80p 1.41%
FTSE 100 - Fallers
Halma (HLMA) 2,968.00p -5.33%
Ocado Group (OCDO) 1,804.00p -4.80%
Spirax-Sarco Engineering (SPX) 15,915.00p -3.65%
Hargreaves Lansdown (HL.) 1,436.00p -3.46%
SEGRO (SGRO) 1,359.00p -3.45%
Polymetal International (POLY) 1,364.00p -3.16%
BT Group (BT.A) 159.70p -3.04%
Flutter Entertainment (CDI) (FLTR) 11,040.00p -2.95%
Scottish Mortgage Inv Trust (SMT) 1,471.50p -2.74%
Johnson Matthey (JMAT) 2,170.00p -2.37%
FTSE 250 - Risers
Telecom Plus (TEP) 1,498.00p 15.59%
Pets at Home Group (PETS) 483.60p 5.54%
Mitie Group (MTO) 68.00p 5.10%
Ferrexpo (FXPO) 296.00p 4.08%
Bodycote (BOY) 869.00p 3.89%
Harbour Energy (HBR) 413.80p 3.19%
Wizz Air Holdings (WIZZ) 4,300.00p 2.77%
Energean (ENOG) 925.00p 2.55%
Babcock International Group (BAB) 322.40p 2.35%
Mitchells & Butlers (MAB) 238.60p 2.05%
FTSE 250 - Fallers
AO World (AO.) 106.80p -13.87%
Diploma (DPLM) 3,160.00p -8.67%
Reach (RCH) 282.00p -7.62%
Hammerson (HMSO) 30.71p -5.25%
Auction Technology Group (ATG) 1,312.00p -4.79%
Hochschild Mining (HOC) 114.40p -4.51%
Renishaw (RSW) 4,998.00p -4.44%
Allianz Technology Trust (ATT) 353.00p -4.32%
Liontrust Asset Management (LIO) 2,120.00p -4.30%
Herald Investment Trust (HRI) 2,470.00p -4.29%