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LONDON (Alliance News) - The FTSE 100 ended lower Friday, meaning London's blue-chip index posted its biggest weekly drop since early December, as mining and oil-related stocks came under renewed pressure as oil prices fell and the US dollar continued to strengthen against major currency pairs.

The FTSE 100 ended down 0.3% at 6,740.58, meaning it fell 2.5% for the week as a whole. The mid-cap FTSE 250 outperformed, ended up 0.3% at 17,109.47, as did the AIM All-Share index, which finished up 0.2% at 717.83.

Brent Oil was trading down 2.2% at USD56.02 a barrel when the London equity markets closed, having touched an intraday low at USD55.99, while West Texas Intermediate was down 4.0% at USD45.28 a barrel.

The International Energy Agency said global oil prices may fall further as supplies continue to mount. With US producers still pumping crude despite storage facilities running out of room to store oil stockpiles, the world's oil watchdog warned the recent stabilization in crude oil prices is nothing but a "facade."

"On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however," the agency said in its monthly report. "Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly."

Oil stocks were again amongst the worst-performing stocks in the FTSE 100, with BG Group ending down 3.2%, Tullow Oil down 1.6%, Weir Group down 2.1% and BP down 1.8%. Royal Dutch Shell 'B' was down 1.5% while the 'A' shares dropped 2.0%.

"The relentless growth in US crude inventories is continuing to exert strong pressure and not even a weaker dollar on Thursday was able to support oil prices," Forex.com Technical Analyst Fawad Razaqzada said. "Thus, until such a time we see a sustained period of destocking, the oil price will most likely remain under pressure as there is evidently too much oil than is currently needed".

The dollar resumed its rise against other major currency pairs on Friday. The pound was trading at USD1.4733 when the London equity markets closed, have hit an intraday low of USD1.4708, marking a near five-year low for sterling. The euro was trading at USD1.0496, having hit an intraday low of USD1.0481, its lowest level since September 2003.

Goldman Sachs analysts expect the US dollar to hit parity with the euro by September, the bank said in a research note Friday. Goldman's 12-month outlook for the euro has been dropped to USD0.95, from USD1.08. Looking further out, the analysts project that the euro will fall to USD0.80 by the end of 2017.

"We continue to believe that euro/dollar will significantly undershoot...reflecting diverging growth and monetary policy outlooks," Goldman said according to the Financial Times.

The European Central Bank's efforts to prevent that divergence by pumping trillions of euros into the economy by buying up bonds has provided a huge boost to the regions stocks as money flows out of bonds and into equities.

A rally in Europe's main stock indices that started last autumn continued Friday. The CAC 40 in Paris ended up 0.5%, after hitting a new record of 5,010.80, and the DAX 30 in Frankfurt ended up 0.9%, after hitting a new record high of 11,903.33 points.

At the London close, US stocks were trading broadly lower as the renewed oil price fall and concerns about the strength of the dollar hit sentiment. The DJIA was down 1.1%, and the S&P 500 and the Nasdaq Composite were both down 0.8%.

A report from the University of Michigan showing an unexpected deterioration in consumer sentiment in the month of March, adding to the negative sentiment.

In the FTSE 100, Glencore ended down 2.9%, BHP Billiton down 3.1%, Anglo American down 2.2% and Rio Tinto down 0.3% as wider commodity prices came under pressure.

Energy companies SSE, down 2.0%, and Centrica, down 1.5%, were also amongst the biggest fallers in the blue-chip index after Labour leader Ed Miliband detailed his party's plans for the sector if he takes power in May, including forcing companies to split out energy generation businesses.

Miliband had said last autumn that Labour would freeze energy prices - allowing them to fall but not rise - until 2017, and Friday said that an energy bill would be one of the first put before a new parliament if Labour takes power in May. He said the new bill would additionally give regulator Ofgem a legal duty to review prices by the autumn – and the power to order price reductions in time for the winter.

"We will then reset the market so that it delivers a better deal for working families by forcing energy companies to separate out the parts of the business that generate energy from the parts that sell to homes and businesses; requiring them to trade their energy on a pool; introducing a simple new tariff structure; and creating a tough new energy watchdog with new powers to police the market," Labour said.

In the FTSE 250, Afren was the worst performer with its shares plunging 28%. The company, which is due to be relegated from the FTSE 250 on March 23, said it has reached an agreement in principle to address its short- and longer-term funding needs and recapitalise its capital structure, but also warned it will be making significant impairments in 2014 followed by significant budget cuts in 2015. A debt-for-equity will dilute existing shareholders to just 11%, but the company warned that without approval of the agreement "existing shareholders would be unlikely to see any return on their current investment".

In the corporate calendar Monday, Tribal Group, Real Estate Investors, EKF Diagnostics Holdings, Brady, Smart Metering Systems and Petards Group will release full year results.

In the economic calendar, the UK Rightmove House Price Index is due at 0001 GMT, and German Buba monthly report is at 1100 GMT. At 1845 GMT, European Central Bank's President Mario Draghi will speak in SZ Finance Day 2015 in Frankfurt. In the US, NY Empire State Manufacturing index is at 1230 GMT, Industrial production is at 1315 GMT, while NAHB Housing Market Index is at 1400 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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