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FTSE 100 closes in the red as oil price slide weighs on resource stocks

The UK blue-chip benchmark closed down around seven points at 6,952

London waterline
The oil price slide hit resource stocks
  • FTSE 100 closes lower

  • US markets seeing red

  • Big oilers hit as crude slides

FTSE 100 closed lower on the day and the[ week as traders fretted over political uncertaintry and the weak oil price.

The UK blue-chip benchmark closed down around seven points at 6,952 with resource stocks taking the brunt of the selling.

On the week as a whole, Footsie was down around 0.87%

Brent crude is down 5.93% at $58.89  a barrel at the time of writing, while WTI - the US benchmark - is down 6.72% at $50.96 a barrel.

David Madden, at CMC Markets, said: "Stock markets are largely lower as political uncertainty persists, and the plunge in the oil price has hurt oil stocks.

"Dealers are still waiting for the Italian and UK situation with respect to the EU to play out. The EU summit over the weekend could shed new light on Brexit."

BP plc (LON:BP. lost 2.40% to 512.60p, while Royal Dutch Shell (LON:RDSA) shed 2.25% to 2,332.32p.

US stocks were seeing red at the time of writing, with the Dow Jones Industrial Average off 117 points at 24,345.

15.00pm: FTSE 100 down 25 points

As expected, US markets opened lower – possibly hungover after celebrating Thanksgiving Day.

On this side of the pond, the blue-chip index was also in the red, albeit after a mini-revival in the run-up to the US open.

The FTSE 100 was down 25 at 6,936, more than 20 points above its intra-day low.

“Oil is the key worry that could yet crack improving sentiment,” suggested Ken Odeluga at City Index, although if you were wondering what positive sentiment he was talking about, he was referring to indices on the European mainland.

“Participants in that market are beginning to require more solid evidence that Saudi Arabia is prepared to defy Washington calls not to crimp supply. All key energy futures are in the red. (Nymex Nat. Gas is 4% lower despite inclement weather across much of the U.S.) Stock markets will keep an eye in the rear-view mirror for better oil prospects as they test the floor,” Odeluga suggested.

While blue-chips in the UK look set to suffer a drab end to a dismal week, junior miner Galantas Gold Corporation (LON:GAL) shot up two-fifths after the planning consent for its Omagh gold mine in County Tyrone was confirmed.

A local resident had challenged the initial decision to approve underground work at the mine but the challeng was thrown out of court.

 

1.30pm: FTSE 100 dips lower in expectation of soft open on Wall Street

With US stocks set to open lower after yesterday’s Thanksgiving Day holiday, the Footsie has slipped further into the red.

The FTSE 100 was down 19 points at 6,942, with the top eight fallers all being resource stocks or, in the case of steel-maker Evraz plc (LON:EVR) – the biggest faller (down 4.6%) - a fellow traveller.

READ US stocks poised for lower opening as Apple slips in pre-market trading on supplier concern

“Whether it’s a case of recovering from the previous day's celebrations or taking advantage of the deep discounts in store and online, activity in the US is likely to be more muted on the final trading day of the week. And who knows, maybe after a day of grabbing bargains, some of that Black Friday mentality may rub off investors with many stocks now trading at a deep discount themselves compared to a couple of months ago,” wondered Craig Erlam at Oanda.

“We’re not quite seeing that rub off on the markets just yet though with US futures trading in the red but we’re heading into a very interesting time of year and they may well now be primed for a so-called Santa rally as all the festive good will finds its way onto Wall Street,” he added.

Luxury items seller Burberry Group PLC (LON:BRBY) defied the trend with a little help from Kepler Chevreux, which has raised its rating to ‘hold’ from ‘reduce’.

The French broker cut its price target to 1,780p from the anagrammatic 1,870p. Burberry shares were up 3.5p at 1,822.5p.

Struggling airline outfit Flybe Group PLC (LON:FLYB) shot up 48% to 14.3p as it confirmed media speculation that Virgin Atlantic Airways is one of the parties it is in discussion with since it put up the ‘for sale’ sign.

Elsewhere among small caps, Amerisur Resources PLC (LON:AMER) soared as it completed a US$93mln farm-out agreement for four exploration blocks in the Putumayo basin, Colombia.

The oil & gas explorer said the deal would involve Occidental Andina, an affiliate of multinational US oil & gas firm Occidental Petroleum Corp (NYSE:OXY), purchasing a 50% interest in each of the blocks, and in return funding a US$93.25mln exploration and appraisal programme between 2019 and 2021.

11.15am: The Footsie treads water

London’s top-shares are in something of a holding pattern ahead of the open of the US markets.

Traders are also holding fire ahead of this weekend’s EU summit.

The FTSE 100 was barely changed at 6,958 while the FTSE 250 index was up 14 points at 18,544, led by Ibstock PLC (LON:IBST), up 9.5% following the sale of its Glen-Gery US brickmaking business for US$110mln as it looks to concentrate more heavily on its home UK market.

READ Ibstock moves out of US as it sells Glen-Gery brickmaking business for US$110mln

“The US$110mln booked from the sale of US-based Glen-Gery will boost the balance sheet and, in a sign that the non-core business will not be missed too much, full-year guidance is maintained despite the loss of a month’s worth of contribution from it,” observed Russ Mould at AJ Bell.

Debt-crippled support services firm Interserve PLC (LON:IRV) had more bad news for the market this morning.

The group said it would unveil its debt reduction plan next year – if it is still in business – but revealed its year-end net debt is now expected to be in the range of £625mln-£650mln – up from £614.3mln at the end of June when it guided to full-year net debt of between £575mln-£600mln.

The shares fell 6.4% to 32.75p and Liberum Capital Markets, which recommends shareholders hang on to their shares, recognised the precipitous decline in the share price by slashing its target price to 35p from 50p, despite calling the unscheduled trading update “reassuring”.

“‘Fit for Growth’ is on track to deliver £15m of savings in FY 2018 and £40m to £50m of annualised savings in FY 2020. There is anecdotal evidence that Interserve’s financial position is making it hard to win new work,” said Liberum, which said it would leave full-year earnings forecasts unchanged while increasing its forecast of net debt from £558mln to £618mln, which is an eye-watering four times projected underlying earnings (EBITDA).

Liberum’s slightly chilling verdict is “valuation is close to irrelevant given the financial risks”.

9.45am: Footsie enjoys a spell in the sunshine

Despite the weakness of miners, the Footsie was enjoying a spell in positive territory mid-morning.

The FTSE 100 index was 22 points higher at 6,982, rising in line with other European indices.

“Markets have paused for breath in parts of the world after an adventurous few weeks. The FTSE 100 and FTSE 250 barely moved on Friday morning, mirroring a similarly static performance across mainland Europe,” said Russ Mould, the investment director at AJ Bell.

“It was a different story in Asia where China’s Shanghai Composite index fell 2.5% as investors sounded caution ahead of next week’s G20 summit. US President Donald Trump will meet Chinese leader Xi Jinping at the event for crucial talks on trade. The decline in the market on Friday implies that investors are nervous that the two leaders won’t come to an amicable agreement,” Mould asserted.

Resource stocks were generally not participating in the Footsie’s advance, especially Fresnillo PLC (LON:FRES), which was down 26p at 776.4p after Morgan Stanley slashed its target price to 715p from 1,100p and moved to ‘underweight’ from ‘equal weight’.

BAE Systems PLC (LON:BA.), down 0.4% at 505p, held up reasonably well under a pincer attack from brokers SocGen and JP Morgan.

The former lopped a quid off its 720p price target and the latter chopped its price target to 625p from 695p.

8.45am: Friday fine for Footsie

The Italian wobbles over, the FTE 100 reclaimed some of the ground lost Thursday, moving 23 points higher to 6,983.72.

But tensions between the EU and its latest problem child could flare up at any time, analysts warned.

“Having set into motion the process of ‘excessive deficit procedure’ towards Italy the EU now runs the risk of its bark being worse than its bite if it now doesn’t follow through on its threats to sanction the Italian government for serious noncompliance,” said Michael Hewson of CMC Markets.

“Unsurprisingly the rising tension appears to have translated into a reluctance on the part of retail investors to buy up Italian bonds, with yesterday’s retail bond sale only raising less than a third of what this type of sale would normally have raised.”

The ‘bottom fishers’ came up to scoop up stock in Royal Mail (LON:RMG), which rose 1.7% early on.

Last week’s figures did little to shore up confidence in the shares, which have tumbled 40% in the last six months.

Dropping down a division, Ibstock’s (LON:IBST) shares advanced 9% after it unveiled plans to offload its US business.

An upgrade to ‘overweight’ by Barclays Capital lifted shares in insurer Hastings (LON:HSTG) 4.6%.

Among the small-caps, beleaguered airline FlyBe (LON:FLYB) was flying 20% higher amid reports Virgin Atlantic may be ready to ride to its rescue.

Proactive news headlines:

Directa Plus PLC (LON:DCTA) has inked a supply contract to provide its Grafysorber technology and oil absorption barriers to GSP Group, a Romanian oil & gas services firm.

James Palmer, the chief financial officer (CFO) of Seeing Machines Limited (LON:SEE), is to step down from his position for personal reasons.

Gaming Realms PLC (LON:GMR) has clinched a 3-year revenue share agreement with Endemol Shine Gaming for the distribution of Deal or No Deal Slingo.

Republic of Georgia-focused oil and gas producer Block Energy PLC (LON:BLOE) ended its financial year with a “robust cash position”.

Canada-based and London-listed Falcon Oil & Gas Ltd (LON:FOG CVE:FO) closed its third quarter with cash of US$7.5mln and no debt. The business has shale interests in Australia at Beetaloo and in South Africa’s Karoo Basin.

Base Resources Limited’s (LON:BSE) chairman believes the profitable mineral sands company “is now very well positioned to create further shareholder value.” At the company’s Annual General Meeting, held today in West Perth, Western Australia, Keith Spence - the AIM-listed firm’s non-executive chairman - said: “We have an outstanding operating asset in our Kwale Operation with strong cash generation and extensional potential, an exciting development opportunity with the World-Class Toliara Project and an outstanding team with a track-record of successful mineral sands development.”

Capital Drilling Limited (LON:CAPD), a leading drilling solutions company focused on the African markets, announced the appointment of Peel Hunt as its joint broker with immediate effect.

Oracle Power PLC (LON:ORCP) confirmed on Thursday that, as advised in its release dated 20 September 2018, Anthony Scutt, who was a director of the Company up to the company's Annual General Meeting, was appointed as a consultant to the group with effect from 1 August 2018 for a fee of £2,000 per month.

W Resources PLC (LON:WRES), the tungsten, copper and gold mining company with assets in Spain and Portugal, has said its chairman, Michael Masterman, will be presenting at a forthcoming investor evening hosted by Turner Pope Investments on Monday 10 December 2018, to be held in London, W1 and which will commence at 5pm.

Alba Mineral Resources PLC (LON:ALBA), the diversified mineral exploration and development company, announced that it will be holding a shareholder update meeting and presentation followed by a Q&A session on 10 December 2018, at 6:30pm at 1 America Square conference centre, 17 Crosswall Street, London EC3N 2LB.

Asiamet Resources Limited (LON:ARS) said it will be exhibiting at the Mines and Money Conference in London from Monday 26 November till Thursday 29 November, hosted at the Business Design Centre, 52 Upper Street, Islington, London N1 0QH. The group said its management will be available to speak with investors at its stand, C20, throughout the event and will also deliver a presentation at 11:30am on Monday 26 November at the Mines and Money Premier Mining Spotlight Theatre.

6.45am: FTSE 100 called higher 

With no US market performance for guidance, UK stocks were expected to drift lower at the outset.

Having tumbled 77 points on Thursday to close at 6,973, the FTSE 100 was tipped to open its account six or seven points lower on Friday.

Investors may well be keeping their powder dry ahead of this weekend’s EU summit meeting and next week’s G20 pow wow.

Asian markets were mixed this morning. In Tokyo, the Nikkei 225 was up 139 at 21,646 but in Hong Kong, the Hang Seng index was 160 points lower at 25,856.

US markets were closed yesterday for Thanksgiving Day and if reports are to be believed, the whole of the USA will spend today online doing some shopping.

Naturally, the phenomenon of Black Friday has crossed the pond, usurping Boxing Day from its rightful occasion when the British public go potty buying things that are ostensibly cheap.

There has been much debate in recent weeks about how good the deals actually are on Black Friday, but we Brits are expected to part with £2.4bn, although that’s slightly less than what we spent last year.

Despite the scepticism, it signals the unofficial start of the Christmas trading period, a make or break time for the nation’s retailers.

It is also a fairly crucial time for the pubs, so it is appropriate that Fuller Smith & Turner PLC (LON:FSTA) is announcing its interims today.

The general trend for pubs groups over the summer period has been for “wet” sales – booze, in other words – to have been good, thanks to the hot weather and the World Cup, while food sales have been weak, for the same reasons.

The £300mln company is much more drinks-focused which means it should have received a big boost from the football and heatwave.

That said, pubs are still facing rising wage costs, higher business rates and increased food and drink costs, while intense competition is keeping prices low.

Investors will want to see how that is affecting margins, and some guidance on cost inflation for the year ahead would be handy, as well.

Significant events expected on Friday:

Interims: Fuller Smith & Turner PLC (LON:FTSA), Record PLC (LON:REC)

Finals: Future PLC (LON:FUTR)

Updates: Origin Enterprises PLC (LON:OGN)

AGMs: Base Resources PLC (LON:BSE)

Around the markets:

  • Sterling: US$1.2876, down 0.02 cents
  • 10-year gilt: yielding 1.284%
  • Gold: US$1,227.80 an ounce, down 20 cents
  • Brent crude: US$66.90 a barrel, down 73 cents
  • Bitcoin: US$4,243.42, down US$214.12

City headlines:

Financial Times

  • Nissan’s board votes to jettison chairman Carlos Ghosn, after he was arrested on suspicion of unlawfully understating his own pay in financial statements.
  • Tesla responds to US-China trade war by reducing the prices of its Model S and Model X in China by 12% to 26%

The Times

  • Theresa May presented the draft agreement on a future relationship with Europe yesterday to a largely hostile Commons, warning that the public wanted Brexit “settled”.
  • The electricals retailer Argos, which is owned by J Sainsbury, said that it had opened 100 collection points, 14 mini outlets inside Sainsbury’s shops and a £2.5 million centre in Croydon to win sales on Black Friday.
  • The spread betting group CMC Markets was forced to slash its dividend after first-half profits plunged on the back of a regulatory crackdown.
  • Financial regulators have warned that they are prepared to see some rent-to-own firms go bust after they launched a crackdown on the industry.
  • The Financial Reporting Council said it was taking KPMG to a tribunal over alleged misconduct in the restructuring of Silentnight, the beds maker.

The Guardian

  • Centrica, the owner of British Gas, revealed it was losing more than 90,000 customers a month and faced a £70 million hit from the forthcoming price cap, plunging its shares to a near 15-year low.
  • SFM UK Management, the British hedge fund run by George Soros, has made a £10 million stock market bet against retailer WH Smith.
  • Majestic Wine is to stockpile more than 1 million extra bottles of wine from France, Spain and Italy as part of its contingency plan in case of a no-Brexit deal.

The Daily Telegraph

  • Nationwide's boss Joe Garner has warned that the availability of homes in the property market is "pretty much at an all time low" and is creating pent-up demand.
  • Mothercare suffered a crash in sales due to negative publicity surrounding its financial health, the company has said, adding shoppers were reluctant to buy products from a retailer that appeared to be teetering on the brink.
  • Jaguar Land Rover has unveiled an updated version of its Range Rover Evoque that will be built in Britain, in what the company said was a demonstration of its "commitment" to UK manufacturing.

Daily Mail

  • Retail tycoon Mike Ashley, who came under criticism for closing stores after buying collapsed firms, demanded an audience with MPs as he slammed politicians and landlords for not doing enough to prop up the embattled High Street.

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