BP Share News (BP.)

LONDON (Alliance News) - Stocks in London were down Wednesday midday, undermined by the continued slump in oil prices, while the pound rose after data showed the UK unemployment rate stepped down another notch and the employment rate hit a record high.

The FTSE 100 index was down 3.0% at 5,701.49 points, the FTSE 250 down 2.6% at 15,703.52 and the AIM All-Share down 2.1% at 678.31. In Europe, the CAC 40 in Paris was down 3.3% and the DAX 30 in Frankfurt down 2.8%.

In three months to November, the UK's ILO unemployment rate was 5.1% versus 5.8% in the same period of last year. It has not been lower since August to October 2005, the ONS said. It was also below the expected rate of 5.2%. The ONS said the employment rate was 74%, the highest since records began in 1971.

Earnings including bonus climbed 2% in the three months to November, with economists expecting a 2.1% increase, following the previous 2.4% rise. Meanwhile, earnings excluding bonus climbed 1.9%, above expectations for a 1.8% decline from the previous 2.0% growth.

The number of people claiming jobseeker's allowance decreased 4,300 in December from November, confounding expectations for an increase of 2,800. At the same time, the claimant count rate held steady at 2.3% as expected in December.

Following the data, the pound recovered some of the ground lost Tuesday after Bank of England Governor Mark Carney pushed back expectations for an interest rate hike in the UK, citing weak domestic growth and turmoil in the global economy.

Sterling touched a low of USD1.4127 on Tuesday but was quoted at USD1.4176 after the data.

Stocks in London were being hit by the continuing decline in crude prices, which is not expected to stop soon, according to a report the International Energy Agency released on Tuesday.

With global oil production growth continuing to outpace a rise in demand during 2015, oil prices look set to come under further pressure this year as the overhang in the market is set to be exacerbated by production coming in from Iran, according to the International Energy Agency.

The IEA, an autonomous organisation made up of 29 member states focused on energy security, development and the environment, warned Tuesday that global oil production is set to continue to increase in 2016, placing further pressure on a market which is already struggling to deal with prices that have fallen below the USD30 a barrel mark.

The IEA said global oil supplies expanded by 2.6 million barrels of oil per day during 2015, building on the 2.4 million barrel a day expansion experienced in 2014, as OPEC continued to ramp up production in its stand off with US shale producers.

North Sea benchmark Brent crude was quoted at USD28.05 a barrel Wednesday midday in London, just above a low of USD27.75 a barrel touched in early trade. Meanwhile, US benchmark West Texas Intermediate was trading at USD28.73 a barrel.

Shares in Royal Dutch Shell were hitting lows they haven't seen since late-2008, after the oil and gas giant said its earnings plummeted in 2015 as a result of lower oil prices.

The group said full-year current cost of supply earnings excluding items is expected to be in the region of USD10.40 billion to USD10.70 billion, little more than half the USD19.04 billion in 2014, whilst income attributable to shareholders will be around USD1.60 billion to USD2.00 billion, also a fraction of the USD14.87 billion a year ago.

However, Shell sought to alleviate concerns over the future of its dividend. It said its 2015 dividend will be USD1.88 per share, and said its dividend in 2016 will be at least that amount. The 2015 dividend is flat from 2014.

Shell 'A' shares were down 5.5%, while 'B' shares were down 5.4%.

Meanwhile, BG Group, which is a week away from a landmark shareholder vote on the company's proposed merger with Shell, said earnings dropped in 2015 as expected, but said those results are in line or ahead of expectations.

"Our excellent operational performance in 2015 is expected to deliver results in line with, or ahead of, our guidance for the year," said Chief Executive Helge Lund.

The oil and gas company said it expects to report total results earnings of "at least" USD2.30 billion in 2015, nearly halving from USD4.03 billion in 2014. Business performance earnings are expected to be around USD1.70 billion, considerably down from USD4.34 billion a year ago.

BG Group was down 2.3%. Similarly, BP was down 2.4%, while mid-caps Nostrum Oil & Gas and Tullow Oil were down 7.3% and 6.3%, respectively.

Asian stocks also suffered from the oil price slump, with the Shanghai Composite index closed down 1.1%, while the Nikkei 225 in Tokyo ended down 3.7%. The Hang Seng in Hong Kong dropped 3.6%.

That sent UK-listed miners back into the red Wednesday. Mining stocks had benefited on Tuesday from a weak set of economic data from China, which had increased expectations for stimulus to the country's economy.

BHP Billiton was down 7.0%, Anglo American down 6.0% and Glencore down 4.4%. Other blue-chips with exposure to China also were suffering once again, with Aberdeen Asset Management down 4.7% and Burberry Group down 3.8%.

BHP Billiton report that further productivity improvements have supported a "robust" period of production in the first half of its financial year as it reiterated its full year production guidance across its commodities except for iron ore.

The multi-commodity giant said petroleum, copper and coal all remain on track to deliver production results in the financial year due to end in June that will meet expectations. However, BHP warned that iron ore production will be lower than previously expected.

London-listed life insurers were giving back their gains from Tuesday, when stocks in the sector had been boosted after Prudential reported a better-than-expected capital position under new European Union insurance rules.

Prudential, which was the first of the London-listed insurers to disclose detailed Solvency II figures, reported a solvency capital ratio - a measure of an insurer's own funds as a percentage of the regulatory requirement - of 190% as of June 30, 2015, versus analyst expectations of about 180%. Under the Solvency II rules, which came into force across the EU at the start of 2016, the group's capital surplus was GBP9.2 billion.

The FTSE 350 Life Insurance Sector index was down 4.6%, having added 2.8% on Tuesday. Prudential was down 5.3%, having risen 3.4% on Tuesday.

In the FTSE 250, WH Smith was up 8.6% after it reported growth in revenue in the 20 weeks to January 16 and said it now expects full-year profit to be ahead of plan following a successful Christmas trading period in the high street division.

Fellow mid-cap stock Pets At Home Group was up 4.3%. The specialist retailer of pet supplies and services reported growth in sales in the third quarter of its financial year and said it is on track to meet full-year expectations, as it achieved strong revenue growth in its vet and grooming services.

US stocks were called for a lower open, with the Dow Industrials seen down 1.9%, the S&P 500 pointed down 1.8% and the Nasdaq 100 seen down 2.0%.

Fourth-quarter results from e-commerce giant eBay are expected after the US market close.

In the US economic calendar, the consumer price index is due at 1330 GMT, while the Redbook index is scheduled for 1355 GMT.

"US inflation data will follow this afternoon, which will take on increased importance – despite not being the Federal Reserve's preferred measure - following its decision to begin the tightening cycle last month," said Oanda senior market analyst Craig Erlam.

"The decision to move on the expectation that inflation will follow was seen as a risky move by many, and we have to assume that if the data doesn't follow, then the path of rates will be slower than the central bank is currently planning," Erlam said.

US inflation is expected to rise to 0.8% year-on-year in December, while economists forecast a flat reading for the quarter-on-quarter figure.

Meanwhile, the World Economic Forum started in Davos, Switzerland on Wednesday.

By Daniel Ruiz; danielruiz@alliancenews.com

Copyright 2016 Alliance News Limited. All Rights Reserved.