London’s blue-chip stocks pulled back some of the losses made by lunch, but were unable to stop the UK’s main index from ending lower.
Investors were spooked early on as Chinese services data reinforced fears of an economic slow-down in the People's Republic.
The Chinese services sector returned a fairly positive number at the end of last week, the best number since September 2014, though that reading was overshadowed by this morning’s weak 50.2 Caixin reading.
This was a drop from 51.2 and means it is at its lowest level since July 2014.
Meanwhile news that North Korea has successfully tested a nuclear bomb added to global jitters with China reportedly condemning the news.
Miners were the most affected by the news, with BHP Billiton (LON:BLT), down 4.9%, or 36p, to 709p, Rio Tinto (LON:RIO), which was 4.8%, or 93p, lower to 1,846p and Anglo American (LON:AAL) down 4.5% to 270p, the top three fallers on the FTSE100.
Joshua Mahony, at IG, said: “The 2016 meltdown has moved into its third day, with both European and US markets selling off heavily once more.”
Over in the States, the Dow Jones was off 237 points at 16,921, while the S&P was off 24 at 1,993 and the Nasdaq Composite was down 54 at 4,837.
A hat-trick of underperforming services PMIs saw the Chinese, UK and US readings all fall short of market expectations today.
Back in the UK, the FTSE100 ended the day around 63 points lower to 6,073 with oil stocks taking the brunt of the damage.
The American Petroleum Institute (API) reported an unexpected draw in US crude inventories, but this was more than offset by larger-than-expected builds in product stocks.
Meanwhile, investor sentiment towards oil was low, with IG’s Mahony adding: “With two of the major OPEC members in Saudi Arabia and Iran butting heads on both a political and religious basis, the idea that we could see any form of compromise to cut production seems foolhardy at best.”
Royal Dutch Shell (LON:RDSB), which is controversially merging with BG Group (LON:BG.), shed 2%., or 31p,to 1,504p while BP (LON:BP.) spilled 1.3% to 343p. BG fell 2.2% to 955p.
Away from commodities, Royal Mail (LON:RMG) was a rare riser as City analysts delivered upgrades on the firm.
Barclays Capital lifted its recommendation to ‘overweight’ from ‘equal weight’, and set a price target of 575p which is some 29% above the current share price of 444p.
Elsewhere, Cantor Fitzgerald says the privatised postal group is now a ‘buy’. Shares lifted 1.3% to 443p.
Away from the index, African Potash (LON:AFPO) jumped 15% to 2p as it revealed it had sent the first 20,000 tonnes of fertiliser under a landmark trade - its first from the COMESA agreement, which will provide it with US$10.16mln of gross revenue.
Elsewhere, fast growing drug delivery group Midatech Pharma (LON:MTPH) pleased the market with an upgraded revenue forecast, as its paediatric brain tumour treatment was chosen for a programme by the Bristol Royal Infirmary. Shares climbed 24p to 202p.
The big winner of the day, however, was Corero Network (LON:CNS) up 20.5% to 19.8p.
The company announced its second tier-one internet service provider order in as many months underlining the significant traction of its technology.
LUNCHTIME REPORT
Traders took fright on Wednesday as oil prices dipped to 11-year lows, although takeover talk in the electronics industry provided a boost.
The FTSE 100 Index fell 105 points to 6032 in early trading as the price of a barrel of Brent crude fell below US$35 for the first time in 11 years, subsiding more than 4% to US$34.9.
The American Petroleum Institute (API) reported an unexpected draw in US crude inventories, but this was more than offset by larger-than-expected builds in product stocks.
An IHS report suggested overall merger and acquisition deal count in the upstream energy sector plunged in 2015 as oil price weakness and volatility made it difficult for buyers and sellers to achieve consensus on value and outlook.
Royal Dutch Shell (LON:RDSB), which is controversially merging with BG Group (LON:BG.), shed 45p to 1490p but BP (LON:BP.) declined 7.75p to 340.4p. BG fell 25.6p to 951.5p.
Services data out of Beijing was disappointing and Pyongyang caused geological and political tremors by reportedly carrying out a fourth nuclear test.
December’s UK Markit/CIPS report on services suggested that the biggest part of the economy ended last year on a slightly weaker note, according to Capital Economics.
Back in the market, vague rumours resurfaced about overseas takeover interest in electronic parts distributor Premier Farnell (LON:PFL).
The shares rose 1.5p to 100p as traders mused over market speculation that potential bidders based in China and Taiwan had approached major shareholders in Premier. A Premier Farnell spokeswoman declined to comment.
Last year, talk emerged that activist investor GO Investment Partners was pushing for a shake-up including a possible merger with rival Electrocomponents (LON:ECM), whose shares fell 4.3p to 225.3p.
African Potash (LON:AFPO) ticked up 0.25p, or 14.3%, to 2p as it revealed it had sent the first 20,000 tonnes of fertiliser under a landmark trade - its first from the COMESA agreement, which will provide it with US$10.16mln of gross revenue.
Patagonia Gold (LON:PGD) gleamed more than 7% to 1.88p on news of an expected earn-in agreement with Trilogy Mining on two plots in Uruguay by the end of the month.
Rame Energy (LON:RAME) shares advanced more than 5% to 10.25p after it announced the sale of its part owned Raki and Huajache Wind Projects, in Chile.
Shares in Sula Iron & Gold (LON:SULA) were 9% brighter at 0.3p as chief executive Nick Warrell said new results from the Ferensola gold project, in Northern Sierra Leone, had exceeded his “best expectations”.
*Remember, Proactive is reporting the hot market topics being discussed by traders and bankers - it is not market fact. Neither is it an invitation to trade on the information.
LONDON OPEN
The London market dived back into negative territory on Wednesday amid turbulence in oil, China and North Korea.
The FTSE 100 Index fell 51 points to 6085 in early trading as the price of a barrel of Brent crude hit an 11-year low, falling more than 2% to US$35.6.
Service data out of Beijing was disappointing and Pyongyang caused geological and political tremors by reportedly carrying out a fourth nuclear test.
Connor Campbell at spread-betting firm Spreadex said: "Potentially making matters worse will be the UK’s own services PMI, forecast to fall from 55.9 to 55.6, which will no doubt only exacerbate investors’ current market jitters."
Oil fell back on more geopolitical worries as the North Korean news added to concern about tension between Saudi Arabia and Iran.
An IHS report suggested overall merger and acquisition deal count in the upstream energy sector plunged in 2015 as oil price weakness and volatility made it difficult for buyers and sellers to achieve consensus on value and outlook.
Royal Dutch Shell (LON:RDSB), which is controversially merging with BG Group (LON:BG.), shed 12p to 1523p but BP (LON:BP.) edged up 0.6p to 348.75p. BG fell 2p to 975.1p.
African Potash (LON:AFPO) ticked up 0.25p, or 14.3%, to 2p as it revealed it had sent the first 20,000 tonnes of fertiliser under a landmark trade - its first from the COMESA agreement, which will provide it with US$10.16mln of gross revenue.
Patagonia Gold (LON:PGD) gained by the same amount, up more than 14% to 2p, after saying it expected to enter into an earn-in agreement with Trilogy Mining on two plots in Uruguay by the end of the month.
MARKET PREVIEW
Britain's blue chips are called to open lower midweek as investor sentiment continues to be hit by fears over China and a drop in oil prices.
Trading in Asia was subdued overnight with Japan's Nikkei 225 down 174 points at the time of writing although the Shanghai Composite was up 54 at 3,341 having started the week with a shocking 7% plunge.
In the US the Dow added just ten to close at 17,159, while the tech heavy Nasdaq exchange gave up 12.
In London on Tuesday, FTSE100 finished 44 points higher at 6,137 buoyed, in some quarters, by takeover talk in retail risk sentiment was definitely subdued.
Today, spreadbetters at IG index are calling Footsie to open around 16 points lower.
The pressure on crude also continues to weigh on markets, with prices near 11 year lows yesterday and dropping below US$36 a barrel.
Traders paid more attention to the fears of oversupply and the strong dollar rather that tensions between two big producers - Saudi Arabia and Iran.
Relations between the countries collapsed after Saudi Arabia executed a Shi'ite cleric.
Bernard Aw, at IG Index, looking at the rest of this week, said: " I think investors will now look to macro data and events for their assessment, as markets resume some normalcy after the year-end holidays.
"Nothing much on China this week, although Markit services PMI may be of interest, given how the services sector continues to stay resilient in the face of a weakening manufacturing industry."