London midday: Stocks decline on China fears, oil price plunge

Trading was suspended in mainland China after the CSI 300 index fell 7%, triggering the nation’s ‘circuit breaker’ rule, designed to stop panic selling. It came after 30 minutes of trading, marking the shortest trading day on record.

“The year has got off to a dreadful start driven primarily by activity in Chinese markets, where the Yuan has weakened dramatically and equity market trading has ceased for a second session after the CSI 300 index fell more than 7%,” said Craig Erlam, senior market analyst at Oanda.

“The move took only 15 minutes to materialise which seriously highlights the extent to which investor sentiment has been shattered this week, not helped of course by the introduction of new circuit breakers that appear to have exacerbated the problem and prompted even more panic selling.”

Meanwhile, oil prices hit new lows with Brent down 1.7% to $33.64 per barrel and West Texas Intermediate down 2.5% to $33.11 per barrel.

“Oil reserves are at record levels around the world, so with a previously guzzling China beginning to choke it’s little surprise we’re now seeing the cost of a barrel at an 11-year low,” said Dennis de Jong, managing director at UFX.com.

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 two, Iran has accused Saudi Arabia of launching an air strike on its embassy in the Yemini capital of Sana’a.

An unexpected nuclear test in North Korea has also added to geopolitical worries this week.

The World Bank has cut 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 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.

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 unemployment 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 afternoon trade, US initial jobless claims will be released at 1330 GMT while Federal Reserve policymaker Jeffrey Lacker speaks at 1915 in Madison.

Corporate stocks

Mining stocks were the biggest fallers on the FTSE, including Anglo American, Glencore and Antofagasta, on concerns over China and geopolitical tensions.

Randgold Resouces, on the other hand, jumped as gold prices rose 0.64% on the Comex.

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. Shares in Sainsbury’s declined.

Centamin dropped amid news of a fatal incident in the open pit operation at its Sukari Mine in Egypt in the fourth quarter.

Market Movers

FTSE 100 (UKX) 5,916.57 -2.58%
FTSE 250 (MCX) 16,705.26 -2.07%
techMARK (TASX) 3,134.14 -2.14%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 4,397.00p 1.59%
Persimmon (PSN) 1,956.00p -0.46%
National Grid (NG.) 943.20p -0.72%
Severn Trent (SVT) 2,136.00p -0.74%
SABMiller (SAB) 4,033.00p -0.84%
Hammerson (HMSO) 586.50p -0.85%
TUI AG Reg Shs (DI) (TUI) 1,210.00p -1.06%
Coca-Cola HBC AG (CDI) (CCH) 1,413.00p -1.12%
United Utilities Group (UU.) 925.50p -1.12%
Imperial Tobacco Group (IMT) 3,559.00p -1.21%

FTSE 100 - Fallers

Anglo American (AAL) 244.15p -9.71%
Aberdeen Asset Management (ADN) 250.20p -7.33%
Glencore (GLEN) 80.73p -5.96%
Old Mutual (OML) 154.70p -5.56%
BHP Billiton (BLT) 674.80p -4.88%
Antofagasta (ANTO) 413.20p -4.73%
Hargreaves Lansdown (HL.) 1,416.00p -4.39%
Prudential (PRU) 1,370.00p -4.33%
Wolseley (WOS) 3,439.00p -4.29%
Schroders (SDR) 2,699.00p -4.19%

FTSE 250 - Risers

Home Retail Group (HOME) 137.40p 3.78%
JD Sports Fashion (JD.) 1,054.00p 2.13%
Acacia Mining (ACA) 184.80p 1.93%
PayPoint (PAY) 919.00p 0.66%
Tate & Lyle (TATE) 580.50p 0.43%
Allied Minds (ALM) 411.30p 0.32%
P2P Global Investments (P2P) 998.00p 0.30%
P2P Global Investments C (P2P2) 975.00p 0.21%
John Laing Infrastructure Fund Ltd (JLIF) 116.60p 0.17%
OneSavings Bank (OSB) 310.30p 0.06%

FTSE 250 - Fallers

Poundland Group (PLND) 170.10p -11.41%
Amec Foster Wheeler (AMFW) 396.90p -6.77%
B&M European Value Retail S.A. (DI) (BME) 248.80p -6.71%
Evraz (EVR) 66.40p -6.54%
Fidelity China Special Situations (FCSS) 129.70p -6.29%
Vedanta Resources (VED) 244.70p -5.96%
AO World (AO.) 139.20p -5.95%
Thomas Cook Group (TCG) 114.70p -5.13%
Drax Group (DRX) 213.90p -4.55%
Senior (SNR) 210.10p -4.50%