BP Share News (BP.)

LONDON (Alliance News) - London shares ended lower Tuesday, dragged by resource stocks and banks, compounded by weak services data from European countries and warnings from the International Monetary Fund that the global recovery remains "too fragile".

The FTSE 100 ended down 1.2%, or 73.49 points, at 6,091.23. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt fell 2.2% and 2.6%, respectively.

At the London close, stocks in New York were adding to their Monday losses, with the DJIA down 0.6%, the S&P 500 down 0.8% and the Nasdaq Composite down 0.7%.

"Traders responded to yesterday's big drop in oil prices and a retreat on Wall Street to dump European equities [Tuesday], which saw miners dominate the bottom of half of the FTSE 100," said FOREX.com analyst Fawad Razaqzada.

Oil was initially depressed by a report on Friday stating Saudi Arabia will freeze crude production only if Iran and others do so as well. Bloomberg reported that the kingdom's deputy crown prince, Mohammed bin Salman, signalled in an interview that, if any country raises output, Saudi Arabia will follow suit.

Oil prices made further losses overnight from Monday, with Brent trading at USD37.66 a barrel at the London equities close Tuesday, against USD38.03 a barrel at the close on Monday. Brent touched a low it hasn't seen in a month of USD37.24 a barrel Tuesday morning.

Miners Glencore, down 5.3%, BHP Billiton, down 4.6% and Anglo American, down 4.0%, closed among the worst performers in the FTSE 100. Oil major Royal Dutch Shell's 'A' shares ended down 1.9%, while BP fell 2.2%.

Oil producers are scheduled to meet in Doha in Qatar on April 17 to complete an accord capping output. Iran is expected to the attend the talks but has ruled out limiting oil supply as it aims to regain market share after sanctions were lifted in January.

However, Razaqzada also noted that weak trading in London-listed banks added to the negative close in the blue-chip index Tuesday.

"The sell-off in banks appears to be in response to the falling yields. Today, for example, the German 10-year Bund yields hit a new 12-month low as they hover near the all-time extreme," Razaqzada noted. The analyst said yields are falling, whilst bond prices are rising, because of the European Central Bank's on-going asset purchase programme.

"Previously, falling yields would have seen the stock markets rise in tandem with bond prices, and weigh on the euro. But this is no longer the case as the market is now more focused on the direction of oil prices and concerns that the record low interest rates would hurt banks' earnings," the analyst said.

Standard Chartered ended down 4.3%, HSBC Holdings down 2.9% and Royal Bank of Scotland Group down 2.6%.

On the corporate front, service sector activity readings from several European countries failed to support stocks. However, the reading from the US released towards the end of the session helped stocks erase some of their earlier losses.

The UK's service sector growth accelerated at a slower-than-expected pace in March, survey figures from Markit Economics showed. The Chartered Institute of Procurement & Supply/Markit services Purchasing Managers' Index rose to 53.7 in March from 52.7 in the previous month. FXStreet.com said economists had expected the index to rise to 54.0.

There also were services PMIs from Germany, France and the eurozone as a whole. Germany's services PMI came in at 55.1 in March, below February's score of 55.5. Economists expected it to come in unchanged. Meanwhile, France's services activity also slowed, with the PMI coming it below 50, meaning contraction, at 49.9. Consensus expected the index to come in unchanged from February's reading of 51.2.

The eurozone services PMI slipped to 53.1 from 53.3 in February, also below the economists estimate of 54.0.

Meanwhile, growth in the US service sector accelerated slightly more than expected in March, a report from the Institute for Supply Management showed. The ISM said its non-manufacturing index climbed to 54.5 in March from 53.4 in February. Economists had expected the index to inch up to 54.0.

"The US could only sort of escape the services slump seen throughout Europe this morning. Yet once a widened trade deficit is taken into account...the day's US data looks slightly less shiny," said Spreadex analyst Connor Campbell.

A report from the US Commerce Department showed that the US trade deficit widened more than expected in February, with imports rising at a faster rate than exports. The report said the trade deficit widened to USD47.1 billion in February from a revised USD45.9 billion in January. Economists had expected the deficit to widen to USD46.2 billion.

At the London close, the pound stood at USD1.4133, compared to USD1.4272 on Monday. The euro was at USD1.1370 at the close, against USD1.1382 on Monday.

Completing the list of reasons for investors to exit the market Tuesday, the International Monetary Fund Managing Director Christine Lagarde said global recovery is continuing but it remains too slow and fragile, and the risks to its sustainability are rising.

The risk of becoming trapped in the so-called "new mediocre" has increased, the IMF Chief warned.

"The recovery remains too slow, too fragile, and risks to its durability are increasing," Lagarde said in a speech in Frankfurt, adding that the persistent low growth can be self-reinforcing through negative effects on potential output that can be hard to reverse.

Elsewhere, gold miner Randgold Resources ended up 1.4%, benefiting from a rise in the metal's price. Gold was quoted at USD1,228.82 at the close, having stood at USD1,218.00 at the close Monday.

London Stock Exchange Group closed up 0.1% on the news that the US's Intercontinental Exchange has secured funding from a trio of banks in preparation for a GBP10 billion takeover bid for LSE, Sky News reported. ICE reached agreement with Morgan Stanley, Wells Fargo and Japan's Mitsubishi UFJ to provide part of the debt needed for an offer, the report said. Citing insiders, the report said other lenders are expected to be added to the syndicate the coming weeks.

Atlanta-based ICE, which is the owner of the New York Stock Exchange, said in early March it was considering an offer for LSE, which agreed the terms of a GBP21 billion merger with German peer Deutsche Boerse AG later that month. LSE closed at 2,792.52 pence Tuesday, giving it a market cap of GBP9.73 billion.

Supermarket chain Tesco dropped 1.9% after it saw its sales fall again in the latest Kantar survey data, while its UK grocery market share continued to decline. Tesco sales fell by 0.2% as its market share declined to 28.1% from 28.4%, although the sales decline eased for the fourth month in a row.

Of the big four supermarkets, J Sainsbury continued to beat its rivals in the race to achieve sales growth, while Asda and Wm Morrison Supermarkets saw sales decline once again. Tesco shares also suffered a downgrade to Hold from Buy by Deutsche Bank. Sainsbury's shares ended up 0.5%, while Morrisons closed down 0.5%.

The FTSE 250 ended down 0.7%, or 120.05 points, at 16,725.59 and the AIM All-Share finished flat, down 0.17 points, at 712.12.

Electrocomponents ended at the top of the mid-cap index, up 9.1%, after saying its headline pretax profit for its financial year that ended in March will hit the top end of market expectations after good sales in the UK and Europe. For the year to the end of March 2015 the electronics distributor reported a headline pretax profit of GBP80.1 million.

Card Factory rose 4.3% after it reported a strikingly higher profit in its recently-ended financial year, boosted by revenue growth in both card and non-card offerings. The card and gifts retailer said pretax profit in the year ended January 31 almost doubled to GBP83.7 million from GBP42.7 million the year before, as revenue rose to GBP381.6 million from GBP353.3 million.

ICAP, the interdealer broker and post-trade risk mitigation provider, closed down 3.6%, after it reported a drop in average daily volumes on its EBS currency trading platform in March. Average daily volumes on a single-count basis on EBS amounted to USD83.7 billion in March, down 27% year-on-year and 18% from February. EBS and BrokerTec, the fixed income trading platform, together make up the bulk of ICAP's electronic markets business.

In the UK corporate calendar Wednesday, easyJet releases its March traffic statistics. Topps Tiles and UK Mail Group issue trading statements, while HSS Hire Group, Styles & Wood Group and ServicePower Technologies publish full-year results.

In the economic calendar, China's Caixin services PMI is due at 0245 BST, while Japan's leading economic index is due at 0600 BST. Germany's industrial production data are due at 0700 BST. In the US, EIA crude oil stocks are due at 1530 BST.

The US Federal Reserve releases the minutes from its monetary policy meeting held on March 15-16 at 1900 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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