LONDON MARKET CLOSE: FTSE's Early Gains Evaporate As Oil Prices Ease

(Alliance News) - Despite some early gains, the FTSE 100 pulled back in the afternoon as oil pared some of its recent gains on anticipation that Saudi Arabia could recover its output faster than initially expected.

The FTSE 100 index closed down 1.01 points at 7,320.40. The FTSE 250 ended down 19.76 points, or 0.1%, at 20,040.54 and the AIM All-Share closed down 2.67 points, or 0.3%, at 884.49.

The Cboe UK 100 ended down 0.4% at 12,414.31, the Cboe UK 250 closed down 0.3% at 17,928.08, and the Cboe Small Companies ended down 0.1% at 10,934.83.

Connor Campbell at Spreadex commented that the FTSE 100 on Tuesday suffered from the same thing it benefited from on Monday - "its weighty oil sector".

Shares in BP closed down 1.5%, while Royal Dutch 'A' shares ended up 0.2% and 'B' shares up 0.4%. On Monday, BP shares had closed up 4.0%, with Shell 'A' shares up 2.1% and 'B' shares up 1.9%.

Brent oil was quoted at USD65.36 a barrel at the London equities close Tuesday, down from USD67.66 late Friday. Nonetheless, oil remains elevated, having been quoted at USD60.32 late Friday.

"Brent Crude began to sink on Tuesday after Reuters reported that Saudi Arabia would be able to get the attacked facility 'fully back online' faster than initially thought," Campbell explained. "Oil's reversal didn't do much for the global markets. The indices remain concerned over what happens next between Saudi Arabia and Iran, fears that helped to undermine sentiment. That and some lingering doubts surrounding what in all likelihood should still be a Fed rate cut on Wednesday night."

The US has concluded the weekend attack on Saudi oil facilities was launched from Iranian soil and cruise missiles were involved, a US official told news agency AFP.

The official, who declined to be identified, said the US was gathering evidence about the attack to present to the international community, notably European allies, at the UN General Assembly next week.

Earlier Tuesday, Iran's supreme leader ruled out negotiations with the US "at any level", as tensions mounted between the arch-foes.

The leader was speaking after devastating drone attacks at the weekend that halved oil output of Iran's regional arch-rival Saudi Arabia – the world's top crude exporter.

Saudi Arabia's oil minister, Prince Abdulaziz, will speak at 1815 BST.

Gold was firm amid the uncertain atmosphere, meanwhile, quoted at USD 1,503.58 an ounce at the London equities close Tuesday against USD1,502.40 at the close on Monday.

Stocks in New York were mixed at the London equities close, with the Dow Jones down 0.2% and the S&P 500 index and Nasdaq Composite both flat.

In European equities on Tuesday, the CAC 40 in Paris ended up 0.2%, while the DAX 30 in Frankfurt ended down 0.1%.

The euro stood at USD1.1051 at the European equities close Tuesday, up against USD1.0992 at the same time on Monday.

The pound, meanwhile, was quoted at USD1.2478 at the London equities close Tuesday, higher compared to USD1.2417 at the close on Monday.

UK Prime Minister Boris Johnson's motive for an "exceptionally long" prorogation was to "silence" Parliament, Supreme Court justices have heard.

Lawyers for Gina Miller, who is bringing a challenge over Johnson's advice to the Queen to suspend Parliament for five weeks, told the UK's highest court that the prime minister's decision was an "unlawful abuse of power".

Eleven justices are hearing appeals over three days arising out of two separate challenges brought in England and Scotland over the legality of the prorogation – which resulted in different outcomes.

The High Court in London dismissed Miller's case, finding that the length of the prorogation was "purely political" and not a matter for the courts. In Edinburgh, the Court of Session concluded Johnson's decision was unlawful because it was "motivated by the improper purpose" of frustrating Parliament.

In London, grocers ended among the worst performers following the latest data from Kantar.

The traditional "big four" grocers, Tesco, J Sainsbury, Wm Morrison Supermarkets, and Walmart Inc-owned Asda Stores all lost market share in the 12 weeks to September 8. However, Ocado saw its market share increase to 1.4% from 1.2%.

Shares in Tesco closed down 1.2%, Sainsbury's down 2.3%, Morrisons down 2.7% and Ocado flat. Walmart was up 0.6% in New York at London equities close.

In the FTSE 250, Sirius Minerals ended the session slumped 53% after failing to complete a crucial financing.

Sirius believes its USD500 million senior note offering can not go ahead "in current market conditions", and as a result, it will be scaling down construction at the polyhalite project in North Yorkshire, north-east England, while a review is carried out.

The USD500 million note offer had been postponed in August due to poor market conditions. It formed part of USD3.8 billion of stage-two funding for Woodsmith, and a USD2.5 billion revolving credit facility from JPMorgan had been reliant on a USD500 million note offering being completed.

Sirius has been talking with the UK government since August's postponement about financing and it had requested USD1 billion of guaranteed bonds from the government if it could not carry out its own financing. However, the government turned the request down.

Elsewhere on the Main Market, retailer French Connection reported a fall in first-half revenue, leading its shares to slide 14%.

The clothing retailer reported that revenue in the six months to July 31 fell by 12% to GBP51.0 million from GBP58.1 million. French Connection attributed this to "the ongoing reduction of the store portfolio and a shift in timing of wholesale shipments into the second half of the year".

The company sharply narrowed its first half loss, however, to GBP4.1 million from GBP15.1 million. Looking ahead, French Connection said it expects challenging retail conditions in the UK to persist.

On AIM, Staffline shares shed 23% after the recruitment firm said it will not pay a dividend for 2019 and 2020, as its cash headroom is expected to remain limited amid difficult trading conditions.

For the six months to the end of June, Staffline reported a pretax loss of GBP7.7 million, compared to a profit of GBP10.5 million the year before. On an underlying basis, pretax profit was down 90% at GBP1.5 million, from GBP15.0 million a year prior.

Looking ahead, Staffline said trading will remain challenging, and it expects an adjusted operating profit of GBP20 million for 2019, below the group's previous expectations of GBP23 million to GBP28 million announced in June.

As it expects cash to be in limited supply during 2019 and 2020, Staffline will not pay a dividend for those two years. For the first half of 2018, Staffline paid an interim dividend of 11.3 pence per share.

In the UK corporate calendar on Wednesday, there are interim results from B&Q owner Kingfisher, car dealer Pendragon and video games services provider Keywords Studios.

In Wednesday's economic calendar, there are Japanese imports and exports at 0050 BST followed by UK inflation at 0930 BST. Eurozone inflation is at 1000 BST, and the US Federal Reserve releases its latest monetary policy decision at 1900 BST, followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

The Fed is widely expected to cut rates again on Wednesday, following the first rate reduction in a decade carried out last month.

Capital Economics said the Fed will likely cut interest rates by 25 basis points, to bring the federal funds rate to a range of 1.75% to 2.00%.

"But rising core inflation, still-solid incoming activity data and the temporary thaw in the US-China trade war together support our view that the Fed will then stand pat at the October meeting, before a further gradual slowdown in economic growth prompts one final rate cut in December," said Capital Economics.

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