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Market ReportFTSE 100

FTSE 100 closes in the red as Saudi oil attacks spook traders

Footsie closed down 46.05 points at 7,321.41, while mid-cap cousin FTSE 250 shed 137.49 at 20,058.26

Royal Dutch Shell -
  • FTSE 100 closes firmly lower

  • US indices down

  • Oil price spike
  • Thomas Cook slides as concerns mount over the rescue page

5pm: Footsie finishes in red

FTSE 100 joined global stocks to head lower Monday as traders fretted over the unease, which was caused by attacks on Saudi oil facilities at the weekend.

"Tensions are running high in the Middle East, and the uncertainty surrounding the situation is likely to hang over the markets in the near-term," said David Madden, analyst at CMC Markets.

Oil prices surged and market scribe Fiona Cincotta, at City Index, also noted that "more price shocks could be in the offing, particularly after President Trump said that the US is 'locked and loaded', waiting to hear from Saudi Arabia on their views about the party behind the attack".

Footsie closed down 46.05 points at 7,321.41, while mid-cap cousin FTSE 250 shed 137.49 at 20,058.26.

Oil stocks were top gainers on Footsie as a result of the commodity's rise. Behemoth BP (LON:BP.) was the top riser. It added 4% to close at 524.60p.

3.10pm: US stocks start lower

As expected, US indices have opened lower with the Dow Jones taking a triple-digit tumble.

The Dow was off 109 points (0.4%) at 27,111 while the broader-based S&P 500 was 10 points softer (0.3%) at 2,998.

On this side of the pond, the FTSE 100 was down 20 points (0.3%) at 7,348.

It's been a bad day for airlines, what with the price of oil going moon-bound after the attack on Saudi oil installations on Saturday; a higher oil price is probably the last thing package tour and airline operator Thomas Cook Group PLC (LON:TCG) needed, although if weekend press reports are on the money, it could all prove to be moot.

The share price was down 7.7% at 4.64p following reports its rescue deal is in danger of collapsing.

Press reports suggested the company is in last-minute discussions with bondholders to persuade them to back the proposed takeover by Chinese firm Fosun Tourism.

Among the FTSE 100 companies, British Airways owner IAG (LON:IAG) was down 2.1% at 447.5p, reflecting the company's heavy fuel bill.

With investors' nerves frayed by increased tensions in the Middle East, risk-averse investors were happy to pile into utilities, especially SSE PLC (LON:SSE), which was up 2.1% at 1,208p after JP Morgan increased its six-month price target to 1,100p from 1,050p.

Elsewhere, Cobham PLC (LON:COB) was 1% higher at 161.3p after shareholders voted in favour of the accepting Advent's 165p a share offer.

1.15pm: FTSE 100 stuck in reverse; FTSE 250 led lower by Sirius Minerals 

Futures markets are suggesting that US indices will open lower, following a global trend following the weekend’s events in the Middle East.

The Dow Jones looks set for a triple-digit fall, diving 102 points to 27,118 while the S&P 500 is seen opening 12 points lower at 2,995.

“As the new trading week gets underway, the standout story is the attack on Saudi Arabia’s oil infrastructure and the fact that the temporary removal of as much as 6% of global output has seen crude prices lurch dramatically higher. Although upbeat oil prices can offer some support for heavyweight energy firms – as is being seen already in European trade - a jump of this size is bad news for consumers and expectations are that the effects will very quickly be seen amongst motorists,” warned James Hughes at Axi Trader.

“With the US economy already risking a slide into recessionary territory, if this spike is sustained then markets could be in for something of a shock. Given the significant impact this news could have on inflation, it also has the potential to steer thinking at the Federal Reserve. If that second rate cut this year looks a little less likely then again, stocks can be expected to come under renewed pressure,” Hughes suggested.

While the Footsie has shown little inclination to budge far from the supine position it adopted early doors – it is currently down 15 points (0.2%) at 7,352 – the oil price, which spiked over the weekend before gently easing this morning, has regained some of its mojo in the afternoon session.

Brent crude for November delivery is now trading at US$66.72 a barrel, up US$6.50 or 10.8%.

“In a sobering display of just how significantly oil prices can react to geopolitical risks, Brent crude prices jumped to more than $71 a barrel in this morning’s opening trade following a series of drone attacks on Saudi Arabia’s crude production facilities over the weekend,” noted Lionel Kruger, a director at JCRA.

“This is the largest single price move since Iraq’s invasion of Kuwait in 1990. The Saudi drone attacks shut down approximately 5% of global crude supply and is the single largest outage from one incident. This coincides with heightened tensions between the USA and Iran in the Straits of Hormuz. Prices settled quickly as both Saudi Arabia and President Trump moved to allay fears of a protracted supply shortage, but further attacks of this nature will be certain to draw swift price reaction,” he added.

The mid-caps have been harder hit than the large-caps by events in the Middle East, with airline stocks Wizz Air PLC (LON:WIZZ) and easyJet PLC (LON:EZJ) - down 3.7% and 2.9% respectively – contributing to a 163 point (0.8%0 fall on the FTSE 250, which is languishing at 20,032.

Sirius Minerals PLC (LON:SXX) is the biggest mid-cap casualty, however, as investors continue to fret over financing requirements for the company's mahoosive potash project in the north-east of England.

The shares were down 10% at 10.07p.

12.20pm: Blue-chips mixed-to-lower

London’s leading equities remain lower on balance with investors rattled by the attacks on Saudi Aramco’s oil facilities on Saturday.

The FTSE 100 was down 17 points (0.2%) at 7,350.

“An attack on the oil facilities of Saudi Arabia’s state oil producer on Saturday has forced the country to freeze a large portion of its production, temporarily removing as much as 5% of global oil output from circulation,” reported Fiona Cincotta, a senior market analyst at City Index.

“Brent crude spiked 20% over the weekend in a move exaggerated by thin late Sunday trade but liquidity has picked up since the London market opened and the price settled at around $65.60 rather than the $72 seen over the weekend.

“More price shocks could be in the offing, particularly after President Trump said that the US is 'locked and loaded', waiting to hear from Saudi Arabia on their views about the party behind the attack,” she added.

According to the Reuters news agency, Saudi Aramco’s full return to normal oil production volumes “may take months” after the attack.

“Before the attack, all the talk was of looming over-supply of oil and the risk of a major price hike looks limited as US shale output would be stepped up in response. Even after its jump, the Brent oil price at $66/bbl is only back close to the middle of the last year’s trading range,” noted Rupert Thompson, the head of research at wealth management firm, Kingswood.

10.45am: Gains for BP and Shell fail to lift the Footsie

Despite the heavily weighted oilers rising in the wake of the attacks on two Saudi Arabian facilities, the Footsie was languishing in the red.

The FTSE 100 was down 9 points (0.1%) at 7,358.

On futures markets, the price of Brent Crude Oil was up US$5.66 (9.4%) to US$65.89 a barrel.

Heavy oil user Carnival Corp PLC (LON:CCL), the cruise ships operator, was sitting low in the water after the attacks – down 3.6% at 3,722p.

Oil producer Tullow Oil plc (LON:TLW) was enjoying “double-bubble”, receiving a boost from the stronger oil price and success with its second discovery in the Orinduik exploration project offshore Guyana.

The shares were up 9.2% at 242.8p.

8.45am: All about the oil price

It was all about the oil price – and the unfolding political situation in the Middle East – early on in London.

Drone attacks on two Saudi Arabian facilities ramped up tensions in the Gulf.

For while Yemeni group claimed responsibility for the violence, it is believed Iran may have been behind it.

Donald Trump’s assertion that the US was “locked and loaded” created collywobbles globally with investors scampering for haven investments such as the yen, the dollar and gold.

The index of UK blue-chips reflected a mood of uncertainty, falling 23 points to 7,344.25.

But the advance of Footsie heavyweights BP (LON:BP. and Shell (LON:RDSA), on the back of higher crude prices, staunched the losses.

They were up respectively 4% and 3% on the back of a surging oil price, with Brent crude up 11% at one point early Monday.

Predictably, British Airways owner IAG (LON:IAG) was a loser with jet fuel prices linked to the cost of the black stuff. It was down 2.4% with the budget carriers moving lower in its vapour trails.

6.20am: FTSE 100 called lower

Oil prices surged after Yemeni rebels claimed responsibility for drone attacks on two of Saudi Arabia’s largest processing operations.

Brent crude for October delivery jumped 10%, while West Texas Intermediate advanced 9%.

President Donald Trump said the US was “locked and loaded” amid claims Iran had orchestrated the weekend attacks.

Asia’s main markets were lower in the wake of the Trump comments except for Japan where the chase for yen-denominated investments pushed the Nikkei 225 1% higher.

Haven investments sought

The Japanese currency, the dollar and gold were heavily bid for their safe haven qualities.

Here in the UK, the spread betting firms are expecting the FTSE 100 to open 35 points lower at 7,332.46.

That said, oil heavyweights such as Shell (LON:RDSA) and BP (LON:BP.) are expected to mitigate some of the potential downside, such is their weighting in the index.

Looking ahead, we have updates from retailers Next (LON:NXT) and B&Q owner Kingfisher (LON:KGF), though the central banks will take centre stage this week as the US Federal Reserve and the Bank of England make their monthly interest rate calls.

Monday’s main market news:

Finals: City London Investment Group PLC (LON:CLIG), MJGleeson PLC (LON:GLE), Petra Diamonds PLC (LON:PDL), Spire Healthcare Group PLC (LON:SPI)

Interims: Horizon Discovery Group PLC (LON:HZD), Learning Technologies Group PLC (LON:LTG), M.P Evans PLC (LON:MPE)., Ocean Outdoor Ltd (LON:OOUT), Science Sport PLC (LON:SIS), Spire Healthcare PLC (LON:SPI)

Economic data: China retail sales and industrial production, US Empire Manufacturing

Around the markets: pound worth US$1.2466; gold changing hands for US$1,512, up US$12.50 an ounce; Brent crude US$66.28 a barrel, up US$6.06

Business Headlines

Financial Times

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Times

  • The former business secretary Sir Vince Cable has attacked opponents of Hong Kong Exchanges and Clearing’s approach for the London Stock Exchange Group as “bash the Chinese” enthusiasts
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  • As helium supplies go pop, businesses spy an opportunity

Daily Telegraph

  • Boris Johnson confident he is closing in on Brexit deal as he heads to key meeting with Jean-Claude Juncker
  • Thomas Cook wins breathing space to secure backing for £1.1bn rescue deal
  • Ineos plan for factory in Wales offers a glimmer of hope to UK car industry

Guardian

  • Slow growth takes shine off Tesco budget chain Jack's a year on
  • More than 1m UK workers denied legal holiday pay
  • More than 1,400 UK restaurants close as casual dining crunch bites

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