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LONDON (Alliance News) - Declining crude prices sent global stock markets into the red on Wednesday, with oil stocks and miners as the main drag on the FTSE 100 in London, which hit lows it hasn't seen since late 2012.

The blue-chip index closed down 3.5% at 5,673.58 points, having touched 5,639.88 earlier in the session, its lowest level since November 2012.

The FTSE 250 ended down 2.9% at 15,641.01 and the AIM All-Share down 2.7% at 674.39. In Europe, the CAC 40 in Paris ended down 3.5%, and the DAX 30 in Frankfurt down 2.8%.

The continuing decline in crude prices is not expected to stop any time 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, crude prices look set to come under further pressure this year as the overhang in the market is expected to be exacerbated by production coming in from Iran, the International Energy Agency said.

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 touched a new record low, slipping to USD27.41 a barrel, a level not seen since late 2003. Brent was quoted at USD27.62 a barrel at the London close. Meanwhile, US benchmark West Texas Intermediate was trading at USD28.19 a barrel at the close, having hit a low of USD28.01 a barrel.

Shares in Royal Dutch Shell hit 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 are expected to be in the region of USD10.40 billion to USD10.70 billion, little more than half the USD19.04 billion reported 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 it posted a year before.

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

Meanwhile, BG Group said earnings dropped in 2015, but said those results are in line or ahead of expectations. The oil and gas company said it expects to report total results earnings of "at least" USD2.30 billion in 2015, nearly halved 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.

"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.

Shell and BG shareholders will vote on the proposed merger between the two companies next week, with the trading updates published by the pair on Wednesday the last pieces of data to trickle through before the fate of the deal is decided.

Shell 'A' shares ended down 4.7%, while 'B' shares dropped 5.4%. BG Group ended down 3.3%.

Asian stocks also suffered from the oil price slump, with the Shanghai Composite index down 1.1%, the Nikkei 225 in Tokyo down 3.7% and the Hang Seng in Hong Kong down 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.

Glencore ended down 9.9%, Anglo American dipped 7.4%, and BHP Billiton dropped 7.0%. Other blue-chips with exposure to China also suffered once again, with Aberdeen Asset Management down 4.9% and Burberry Group down 1.7%.

BHP said further productivity improvements have supported a "robust" period of production in the first half of the financial year as it reiterated its full year production guidance across all of 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, it warned iron ore will be lower than previously expected following the incident at the Samarco operation in Brazil.

The UK jobless rate fell to its lowest level since early 2006, while the employment rate hit a record high in the three months ended November, data from the Office for National Statistics showed. The report also showed that wage growth remained subdued, meaning record low UK interest rates could be prolonged for more time than expected, as BoE Governor Mark Carney suggested on Tuesday.

In three months to November, the UK's unemployment rate was 5.1% versus 5.8% in the same period of last year, below expectations of 5.2%. It has not been lower since August to October 2005, the ONS said. Meanwhile, 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.

US consumer prices dipped slightly in December, data from the US Labor Department showed Wednesday. This came as a surprise to economists, who had expected the measure to remain flat.

In the US, the Labor Department said its consumer price index, a key gauge of retail inflation, slipped 0.1% in December. The CPI increased 0.7% annually through December, the biggest increase in a year. However, the year-on-year figure came in below economists expectations for a 0.8% rise.

Core consumer prices, a figure that strips out the volatile food and energy sectors, advanced by only 0.1% month-on-month. Economists projected another 0.2% increase after similar increases the previous three months. Year-on-year, core consumer prices came in line with expectations for an increase of 2.1%.

The data didn't have much effect on the US dollar, which has remained strong against the euro and the pound for some time. Sterling rose slightly against the greenback, standing at USD1.4210 at the London close, having stood at USD1.4148 prior to the data. The euro was quoted at USD1.0912, flat compared with its level prior.

With consumer prices remaining below their 2% target for inflation, the US Federal Reserve will likely leave interest rates on hold for some time, following its decision to begin the tightening cycle in December.

Wall Street was lower at the London close, with the Dow Industrials down 2.6%, the S&P 500 down 2.7% and the Nasdaq Composite down 2.6%.

Elsewhere on the London Stock Exchange, WH Smith ended at the top of the FTSE 250, up 5.8% 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 rose 4.9%. 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.

JD Wetherspoon ended at the bottom of the mid-cap index, down 9.7%. The pub company warned that labour costs will hit its full-year profit as increases in the pay of hourly staff have cut operating margin by more than analysts had expected.

In the UK corporate calendar, Pearson and SABMiller release trading statements. Acacia Mining issues a fourth-quarter production update, N Brown Group issues its Christmas trading statement and Laird, Halfords, and Royal Mail Group all publish trading statements. St James's Place releases its new business results, while NCC Group publishes half-year results.

In the economic calendar, the World Economic Forum will begin its second day at Davos, Switzerland. The European Central Bank releases its monetary policy decision at 1245 GMT, while ECB President Mario Draghi will hold a press conference at 1330 GMT. In the US, initial and continuing jobless claims data are due at 1330 GMT, while the Energy Information Administration releases its crude oil stocks data at 1600 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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