BP Share News (BP.)

LONDON (Alliance News) - A commodity sector sell-off drove the FTSE 100 into the red Tuesday, with BP amongst the biggest culprits as it reported a loss for 2015 after being hit by low oil prices and costs related to the oil spill in the Gulf of Mexico.

The FTSE 100 closed down 2.3% at 5,922.01, the FTSE 250 ended down 1.2% at 16,299.68 and the AIM All-Share index ended down 0.4% at 693.48.

The CAC 40 in Paris closed down 2.5%, while the DAX 30 in Frankfurt ended down 1.8%.

On Wall Street at the London close, the Dow Jones Industrial Average was down 1.3%, the S&P 500 was down 1.2% and the Nasdaq Composite was down 0.8%.

The stock market rout in Europe and the US tracked another sharp decline in oil prices. Brent oil fell to a low of USD32.20 a barrel on Tuesday, and at the London equity market close was at USD33.07. This was lower than the USD34.73 seen at the close on Monday. US benchmark West Texas Intermediate fell to a low of USD29.79 a barrel.

"The resumption of Brent Crude's decline has been the main catalyst for the day's dismal trading. And as ever, when the commodities begin to fall the FTSE loses its way in pretty dramatic fashion," said Connor Campbell, financial analyst at Spreadex.

Oil and gas major BP was one of the biggest fallers in the index, down 7.2%, after it reported a more than USD5.00 billion loss in 2015, as its upstream division was hit by lower oil prices and it booked large charges related to the oil spill in the Gulf of Mexico in 2010.

BP's results came in way below analyst expectations after a steeper than expected drop in underlying replacement cost profit, analysts' preferred financial measure, in the final quarter of the year which caused underlying profit for the full year to more than halve - with large amounts of items causing BP to swing to an overall replacement cost loss for the year.

BP said it made an underlying replacement cost profit of USD196.0 million in the fourth quarter of 2015, significantly lower than the USD730.0 million analysts were expecting, according to a market consensus provided by BP. Replacement cost profit is a standard measure used in the oil industry that takes into account the price of oil, and the underlying result is adjusted for non-operating items and fair value accounting effects.

Amid the tough conditions for the group and the oil and gas industry at large, BP took further steps to adjust its business to suit the low oil price environment by announcing 3,000 further job cuts over the next two years in its downstream unit, building on the 4,000 it announced for its upstream business in 2015.

The company also kept its promise of maintaining its dividend for 2015 flat year-on-year as all of the London-listed companies in the sector continue to battle to ensure they are not the first to make cuts to their historically sacred payouts.

The low oil price and weak BP earnings also meant the Royal Dutch Shell, which reports full-year results on Thursday, ended amongst the biggest fallers in the FTSE 100, with 'B' shares down 3.5% and 'A' shares down 2.5%.

Mining stocks weighed further on the large-cap index, with Anglo American down 8.0%, Glencore down 5.5%, and Rio Tinto down 4.6%. IG Market Analyst Alistair McCaig said whilst not aggressive sell-offs, declines in base metals prices added to the negative sentiment in the market.

Gold was largely flat on Monday's prices, trading at USD1,125.76 an ounce at the London equity market close Tuesday versus USD1,126.39 on Monday.

J Sainsbury shares closed up 0.4% after it said it has agreed the key financial terms of a takeover offer for Home Retail Group following weeks of speculation about a deal, and confirmed widespread suspicions that it had no desire to add the Homebase business to its portfolio, with its sights firmly set on catalogue retailer Argos.

Reports in the days leading up to the Tuesday deadline for Sainsbury's to make an offer had indicated the two sides were still some distance apart on the value of the offer for Home Retail. The Financial Times over the weekend claimed two key Home Retail shareholders, Toscafund and Schroders, were pushing for at least 160 pence per share, or preferably closer to 165p, while other reports had claimed Home Retail may be holding out for as much as 170p.

Under the terms of the offer unveiled on Tuesday, Home Retail shareholders will receive 0.321 of a new Sainsbury's share and 55.00p in cash for each Home Retail share. They will also get another 25p per share from the GBP200.0 million capital return planned from the sale of DIY and garden centre chain Homebase to Australian conglomerate Wesfarmers Ltd.

The value of the offer and the capital return implies a price of around 161.3p per Home Retail share, towards the lower end of the range reports prior to the deal had indicated Home Retail would be willing to sell at. At the close, Home Retail was down 0.5% to 152.20p.

In the FTSE 250, TalkTalk Telecom Group closed up 7.6% as it confirmed its business took significant hit from the high-profile cyber attack late last year, shedding a net 101,000 customers in its third quarter, but investors welcomed the news that business has since returned to normal.

The group said its financial third quarter to the end of December had been dominated by the attack. It added fewer new customers as it closed down its online sales and service channels as part of its response to the attack, and it took longer than expected to restore those channels to full effectiveness. It also lost existing customers in the wake of the breach, seeing churn for the quarter of 2.1%.

However, TalkTalk highlighted that the actions it took following the breach helped to restore customer loyalty.

The company offered an unconditional free upgrade that was taken up by 489,000 customers, which it said helped improve trust in the brand. External survey data on customer sentiment has been on an improving trend since December, TalkTalk said, and it has seen a return to positive growth in revenue generating units in January.

UDG Healthcare, up 1.6%, said its trading for the three months to December 31 was well ahead of the prior year, on the back of a strong performance in the US and Europe.

The healthcare provider said operating profit was up across divisions for the first quarter and said, in light of the figures, it expects a good underlying cashflow performance for the year.

In economic news, the unemployment rate in the eurozone fell to its lowest level in more than four years. Eurostat said the jobless rate dropped to 10.4% in December from 10.5% in November, the lowest since September 2011.

Earlier, data from the German Federal Labor Agency showed German unemployment declined by more than expected in January. The number of people out of work decreased 20,000, much bigger than an expected decrease of 8,000. The jobless rate fell to a record 6.2% from 6.3% in December. It was forecast to remain unchanged at 6.3% in January.

At the London close the euro traded the dollar at USD1.0898, compared to USD1.0889 on Monday.

Sterling traded the greenback at USD1.4388 versus USD1.4370 on Monday.

In the economic calendar for Wednesday, the Caixin China services Purchasing Managers' Index is at 0145 GMT, before the Japanese consumer confidence index at 0500 GMT. Investors will also be keen to hear from Bank of Japan Governor Haruhiko Kuroda, who will be speaking in Tokyo at 0430 GMT, after the central bank cut interest rates into negative territory on Friday.

After the London stock market open, there are Markit services and composite PMI readings from a number of European countries. France is at 0850 GMT, Germany at 0855 GMT, and the eurozone as a whole at 0900 GMT. UK services PMI is at 0930 GMT. Eurozone retail sales follow at 1000 GMT, at the same time as the European Commission's economic growth forecasts for the region.

Later in the day, there are US MBA mortgage applications at 1200 GMT, ADP employment for January at 1315 GMT, and trade balance at 1330 GMT. Markit services and composite PMI for the US is at 1445 GMT, before ISM non-manufacturing PMI at 1500 GMT, just before Energy Information Administration crude oil stocks.

In the UK corporate calendar, fund supermarket Hargreaves Lansdown reports interim results, while water company Severn Trent, specialty chemicals and platinum metals company Johnson Matthey, estate agency Foxtons Group and waste management company Shanks Group all give trading statements. GlaxoSmithKline reports full-year results at midday.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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