London close: UK stocks finish in the red as oil prices plunge

Oil prices reversed gains in the previous session as concern grows that Iran could restart oil exports flooding the market in an already oversupplied market.

At 1626 GMT, Brent crude plunged 5.2% to $29.34 per barrel and West Texas Intermediate tumbled 5.9% to $29.44 per barrel.

“Oil experienced a very turbulent start to 2016 and remains victim to a ceaseless theme of an aggressive oversupply in the markets, while rising concerns around slowing global growth have renewed fears that demand may be waning,” said FXTM research analyst Lukman Otunuga.

Elsewhere, China entered a bear market as the Shanghai Composite Index closed down 3.5%, falling more than 20% from its December high, amid concerns about the volatility in the yuan. A bear market is when the price of an asset drops 20% from its peak.

The index was also weighed down by a report that some banks in Shanghai have suspended the acceptance of shares from smaller listed companies as collateral for loans.

“Interventions by Chinese authorities are beginning to wane and lack effect as the cycle of capital outflows, weaker yuan and general volatility undermines investor confidence globally,” said Brenda Kelly, head of analysts at London Capital Group.

Economic data

UK construction output unexpectedly dropped in November from the previous month, according to figures released by the Office for National Statistics. Output fell 0.5%, its biggest decline since May 2013 and well short of economists’ expectations for a 0.5% increase. Output had edged up 0.2% in October.

Howard Archer, chief European and UK economist at IHS Global Insight said: “Another blow to hopes that UK GDP growth picked up in the fourth quarter of 2015 as construction output disappointing fell 0.5% month-on-month in November. This follows on from the even more damaging news that industrial production fell 0.7% month-on-month in November.”

US retail sales fell 0.1% in December, as expected, following a 0.4% increase in November, according to the Commerce Department. However, core retail sales fell 0.3% in December, missing forecasts for a 0.3% increase.

The US producer-price index fell 0.2% in December, the Labor Department said, in line with estimates. Excluding the volatile food and energy categories, core prices rose 0.1%, also as predicted.

US industrial production fell for the third straight month in December, according to data released by the Federal Reserve.

US industrial output dropped a seasonally-adjusted 0.4% last month, steeper than the 0.2% slip economists had been expecting. Manufacturing output, which makes up nearly three quarters of overall industrial output, fell 0.1% in December, worse than the zero growth predicted.

Consumer sentiment in the US rose a little more than expected this month, according to preliminary figures released by the University of Michigan. The index of consumer sentiment rose to 93.3 in January from 92.6 in December and compared with economists’ expectations for a reading of 93.

Meanwhile, Federal Reserve policymaker William Dudley said the economic outlook had not changed since the central bank’s last policy meeting and that interest rates will continue to gradually rise.

Fellow Fed official Fred Kaplan will speak in Dallas at 1800 GMT.

Corporate stocks

BHP Billiton slumped after saying it expects to book a $7.2bn (£5m) impairment charge on the value of its onshore US assets in its half-year results due to the steep drop in oil prices.

Fellow miners Anglo American, Rio Tinto and Antofagasta also declined on China worries while oil producers Royal Dutch Shell and Tullow Oil were hit by the drop in crude prices.

Among one of the few risers in the sector, Randgold Resources gained as gold prices rose. Spot gold was up 1.38% to $1,093.27, edging closer to hitting $1,100 again.

Tate & Lyle advanced following an encouraging capital markets day. Liberum reiterated its ‘buy’ rating on the stock, saying it laid out credible plans to deliver its ambition to transform the group into a materially Speciality Food Ingredients-focused business by 2020.

Shire rallied after chief executive Flemming Ornskov revealed that the drug developer's internal plans for the merger with Baxalta are much more positive than it set out publicly.

Moneysupermarket slumped after the company’s fourth quarter insurance revenues were hit by stronger competitor marketing activity than anticipated. Revenues for that division fell 10%, down to £28.9m.

Market Movers

FTSE 100 (UKX) 5,793.32 -2.11%
FTSE 250 (MCX) 16,150.22 -1.60%
techMARK (TASX) 3,067.77 -1.59%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 4,387.00p 3.74%
Shire Plc (SHP) 4,179.00p 1.19%
Admiral Group (ADM) 1,630.00p 1.18%
Next (NXT) 6,740.00p 1.05%
SABMiller (SAB) 4,082.00p 0.43%
Direct Line Insurance Group (DLG) 369.60p 0.30%
Kingfisher (KGF) 334.20p -0.00%
Burberry Group (BRBY) 1,120.00p -0.09%
ITV (ITV) 259.40p -0.15%
RSA Insurance Group (RSA) 402.70p -0.30%

FTSE 100 - Fallers

Anglo American (AAL) 232.75p -11.49%
Glencore (GLEN) 73.12p -7.00%
BHP Billiton (BLT) 614.10p -6.53%
Hargreaves Lansdown (HL.) 1,220.00p -6.37%
Antofagasta (ANTO) 350.20p -6.09%
Rio Tinto (RIO) 1,643.50p -5.27%
Old Mutual (OML) 151.20p -4.85%
Royal Bank of Scotland Group (RBS) 264.50p -4.51%
Standard Chartered (STAN) 496.30p -4.34%
London Stock Exchange Group (LSE) 2,399.00p -3.81%

FTSE 250 - Risers

Centamin (DI) (CEY) 66.00p 3.94%
Tate & Lyle (TATE) 603.50p 3.43%
JD Sports Fashion (JD.) 1,135.00p 2.99%
Betfair Group (BET) 3,753.00p 2.99%
Genus (GNS) 1,420.00p 2.90%
Bwin.party Digital Entertainment (BPTY) 125.90p 1.94%
PayPoint (PAY) 890.00p 1.83%
Indivior (INDV) 166.30p 1.53%
Dignity (DTY) 2,315.00p 1.45%
Nostrum Oil & Gas (NOG) 334.60p 1.42%

FTSE 250 - Fallers

Moneysupermarket.com Group (MONY) 313.70p -10.68%
Jupiter Fund Management (JUP) 384.80p -8.49%
Pendragon (PDG) 42.36p -8.41%
Aldermore Group (ALD) 180.00p -7.69%
Vedanta Resources (VED) 225.30p -6.51%
Tullow Oil (TLW) 130.20p -6.20%
Virgin Money Holdings (UK) (VM.) 298.30p -6.19%
Rotork (ROR) 159.80p -6.06%
Fidessa Group (FDSA) 1,804.00p -5.99%
Telecom Plus (TEP) 910.50p -5.79%