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LONDON (Alliance News) - London shares opened lower Tuesday, with oil-related stocks and miners as the main drag, as oil prices remain close to seven-year lows, still hurt by the OPEC decision on Friday to maintain current production levels.
The FTSE 100 index was down 0.3% at 6,205.35 points, the FTSE 250 down 0.1% at 17,330.09, while the AIM All-Share was off 0.1% at 740.78. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both flat.
UK-listed oil stocks were heading south again on Tuesday following the fall in oil prices seen on Monday. Brent oil was priced at USD41.03 a barrel just after the London open Tuesday, having stood at USD41.12 a barrel at the close on Monday. Meanwhile, West Texas Intermediate was at USD37.81 a barrel at the open.
The fall in oil prices came after the decision of the Organisation of Petroleum Exporting Countries to maintain production levels despite an oversupplied market and low prices
"No ceiling was mentioned which suggests the group couldn't agree on how best to accommodate the return of Iranian oil to the markets now that sanctions have been lifted. This doesn't bode well for oil producers after a year in which the world has been flooded with oil and storage containers are now nearing capacity, leaving plenty of scope for further sharp declines in oil prices," said Oanda analyst Craig Erlam.
Erlam said the next key technical levels for Brent are around USD36.20, while for WTI are between USD32.40 and USD33.55, "the lows seen at the height of the financial crisis at the end of 2008 and the start of 2009".
BP was down 0.8%, while BG Group was off 0.3%. Meanwhile, Royal Dutch Shell 'A' and 'B' shares were down 0.2% and 0.4%, respectively, having fell 4.0% and 3.2% on Monday. In the FTSE 250, Tullow Oil was down 0.6% and Ophir Energy was down 1.5%.
CMC Market chief market analyst Michael Hewson said "metals prices also came under pressure, with iron ore prices slipping further below USD40 a ton and, with no evidence of a base in sight, this in turn is likely to turn the screws further on a highly leveraged mining sector."
As a result, mining stocks were also adding to the losses seen on Monday. BHP Billiton was down 3.3%, Rio Tinto down 2.2% and Anglo American, down 2.1%.
Anglo American outlined a "radical" portfolio restructuring and plans to cut costs further by suspending its dividend and cutting expenditure as the miner tries to adjust the business to be more competitive in an environment with falling commodity prices.
The FTSE 100-listed miner said it was setting out an "accelerated and more radical restructuring programme to redefine the focus of its asset portfolio to transform the company's competitive position and create a more resilient business to deliver sustainable shareholder returns."
Anglo American plans to suspend its dividend for the second half of 2015 and for 2016. Once the dividend resumes, the miner plans to change its policy so it is more in line with earnings.
At the other end of the blue-chip index, Air carriers International Airlines Group and easyJet were in favour, up 1.1% and 0.3%, respectively.
Wm Morrison Supermarkets was up 0.6% after being upgraded by HSBC to Hold from Reduce.
In AIM, Cenkos Securities was up 9.4% after it said it is not under investigation by the UK's Serious Fraud Office. The stockbroker said it has "not been asked to provide, and nor has it provided, any information" to the SFO in relation to any investigation.
"The company is currently working with its advisers to address and rectify the position in relation to the inaccurate reporting referred to above," Cenkos said in a statement.
Top-level domain company CentralNic Group was down 22% after saying it has agreed to acquire Australia-based Instra Group and will back the deal with a share placing. CentralNic said it will pay a total of AUD33.0 million to acquire Instra, a privately-owned domain name retailer, consisting of AUD30.0 million in cash and AUD3.0 million in CentralNic shares.
In addition, CentralNic said it will raise around GBP10.0 million via a share placing through Zeus Capital and Peel Hunt. It will issue a total of 25.0 million shares at 40.00 pence per share. Taken together, the placing shares and the consideration shares will represent around 31% of CentralNic's issued share capital upon completion.
The fall in crude prices hit US stocks on Monday, with the DJIA and the S&P 500 ending down 0.7% and the Nasdaq Composite down 0.8%. But Wall Street also felt that an increase in interest rates by the US Federal Reserve looms, following a strong job report released on Friday. The next Fed monetary policy meeting is due on December 15-16.
Asian stocks ended on the back foot on Tuesday, with the Japanese Nikkei 225 index down 1.0%, while in China, the Shanghai Composite ended down 1.9%, and the Hang Seng index in Hong Kong down 1.5%.
Japan's gross domestic product was revised up to 1.0% on year in the third quarter of 2015, the Cabinet Office said on Tuesday. That topped forecasts for an increase of 0.2%, and it was up sharply from November's preliminary reading that suggested a contraction of 0.8%. The revision means that Japan escaped recession, since the final Q2 figure was a contraction of 0.7%.
On a quarterly basis, GDP expanded 0.3% - also beating forecasts for a flat reading. The preliminary reading called for a decline of 0.2%, which was unchanged from the second quarter. Nominal GDP was revised up to 0.4% - also exceeding forecasts for 0.2% following the preliminary suggestion of a flat reading.
China's exports declined for the fifth straight month on weak global demand, while imports dropped less than expected in November, official data showed Tuesday.
Exports decreased 6.8% in November from last year, the General Administration of Customs reported. Shipments were forecast to drop at a slightly slower pace of 5% after falling 6.9% in October. At the same time, imports slid 8.7% annually, but fared better than an expected decline of 11.6% and an 18.8% fall seen in October.
Nonetheless, the trade surplus fell unexpectedly to USD54.1 billion from USD61.6 billion in October. It was forecast to rise to USD63.5 billion in November.
Still in the economic calendar, UK manufacturing and industrial production data are due at 0930 GMT, while the NIESR GDP Estimate for the third-quarter is due at 1500 GMT. Before that, the eurozone third-quarter gross domestic product data are due at 1000 GMT. In the US, the Redbook index is due at 1355 GMT, while JOLTS job openings data are expected at 1500 GMT.
By Daniel Ruiz; danielruiz@alliancenews.com
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