LONDON MARKET CLOSE: Stocks Slide As Oil Market Slump Knocks Sentiment

(Alliance News) - London stocks sank on Tuesday as sentiment took a hit from a historic crash in crude oil prices, heaping pressure on blue-chip oil stocks as well as miners.

"We are in genuinely unprecedented territory after the US benchmark WTI slumped into negative territory overnight," said Russ Mould, investment director at AJ Bell.

"With the May futures contract expiring today, no takers for physical delivery, a growing supply glut putting pressure on key infrastructure and traders looking to sell or roll over contracts to the next month, there was a perfect storm which drove the extreme price action yesterday," Mould added. "Unless the global economy is in a better place by mid-May then we could be looking at a very similar situation in a months' time for WTI price action."

The FTSE 100 index closed down 171.80 points, or 3.0%, at 5,641.03. The FTSE 250 ended down 423.48 points, or 2.7%. at 15,399.25, and the AIM All-Share closed down 10.67 points, or 1.4%, at 753.08.

The Cboe UK 100 ended down 2.7% at 9,554.19, the Cboe UK 250 closed down 2.4%, and the Cboe Small Companies ended down 1.3% at 8,689.60.

In European equities on Tuesday, the CAC 40 in Paris ended down 3.8%, while the DAX 30 in Frankfurt ended down 4.0%.

US benchmark West Texas Intermediate for May delivery closed at minus USD37.63 in New York on Monday. According to CME, May WTI was trading at USD3.87 Tuesday afternoon, rebounding back into positive territory.

The May futures contract expires Tuesday, meaning traders of the commodity for profit need to find someone to take physical possession of the oil. But with the glut in markets and storage facilities full, buyers have been scarce.

Oil markets have plunged in recent weeks as lockdowns and travel restrictions to fight the coronavirus around the world cripple demand.

In response to the historic price collapse, US President Donald Trump on Tuesday ordered his administration to come up with a plan to aid US oil companies.

"I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!" Trump said on Twitter.

Brent oil sank to USD19.75 a barrel at the London equities close Tuesday from USD26.22 late Monday.

Troubles in the oil market heaped pressure on BP and Royal Dutch Shell on Tuesday, as well as London's raft of miners. BP shares closed down 3.0% while Shell A and B stock ended 2.6% and 4.1% lower respectively.

Miners such as Antofagasta, Glencore and BHP slumped 8.2% and 6.6% and 6.4% respectively.

Despite the risk-off mood on Tuesday, safe haven asset gold struggled. Gold was quoted at USD1,678.49 an ounce at the London equities close Tuesday against USD1,692.55 at the close on Monday.

"Gold is in the red as the slightly firmer US dollar is hurting the asset as the two usually have an inverse relationship. Gold is not the only metal to suffer today as copper, silver, platinum and palladium are all offside – palladium is down over 10%," said David Madden at CMC Markets.

The euro stood at USD1.0864 at the European equities close Tuesday, lower against USD1.0873 at the same time on Monday. Against the yen, the dollar was trading at JPY107.54 compared to JPY107.72 late Monday.

The pound tumbled to USD1.2291 at the London equities close Tuesday from USD1.2458 at the close on Monday.

The Office for National Statistics revealed on Tuesday that unemployment increased by 22,000 to 1.36 million in the three months to February, before Covid-19 gripped the UK.

The number of job vacancies plunged by 52,000 to 795,000 for the quarter, and the unemployment rate in the UK increased to 4.0% in February from 3.9% in January.

Stocks in New York were firmly in the red at the London equities close, with the Dow Jones down 2.3%, the S&P 500 index down 3.1%, and the Nasdaq Composite down 3.9%.

On Wall Street, Philip Morris shares dipped 4.8% as the tobacco firm recorded a rise in earnings in the first quarter, but expects a "soft" second quarter due to the Covid-19 pandemic.

Coca-Cola shares fell 1.0%, meanwhile, as the soft drinks giant posted a rise in first quarter earnings but warned social distancing measures to combat coronavirus are weighing on sales.

The drinks giant said first-quarter sales got a lift from pantry loading as consumers boosted purchases of soda and other items as governments enacted lockdown measures. But Coca-Cola said second-quarter results would suffer because of the significant drop in "away-from-home" channels with the suspension of major sporting events and the closing of restaurants, movie theatre and other public venues.

In London, Associated British Foods was in the red along with blue-chip miners, closing down 6.1%.

In the six months to February 29, the Primark owner's revenue climbed 1.5% year-on-year to GBP7.65 billion from GBP7.53 billion. However, pretax profit plunged 42% to GBP298 million from GBP515 million a year prior as exceptional costs multiplied to GBP309 million from GBP79 million.

AB Foods said it recognised a GBP248 million inventory charge, a GBP36 million provision for a onerous contract, and a GBP25 million exceptional cost following fire damage at a baked goods factory in Wakefield, West Yorkshire.

An inventory value assessment has been conducted in response to closures of fashion store Primark due to the Covid-19 pandemic, AB Foods explained, and much was found to have little remaining value.

Admiral closed up 2.6% after the motor insurer pledged to hand back GBP110 million to car and van policyholders as claims plunge amid the coronavirus lockdown.

The Cardiff-based group said it will pay out GBP25 for each of the 4.4 million vehicles covered at April 20, with refunds being made by the end of May. It said it is able to give customers the cash thanks to falling claims as fewer drivers are on the road due to Covid-19 restrictions.

In the FTSE 250, Centamin shares rose 2.2% after the gold miner posted a good start to 2020.

Centamin produced 125,090 ounces of gold from the Sukari mine in Egypt in the three months to the end of March, up 8% from 116,183 ounces a year ago. Gross revenue for the first quarter totalled USD222.2 million, generated from 139,784 ounces in gold sales at an average realised price of USD1,587 per ounce.

In the corporate calendar for Wednesday there are first quarter results from CRH and quarterly production figures from miner Antofagasta. Retailer WH Smith posts interim results, and AIM constituents Fevertree Drinks and boohoo both release full-year results.

The economic calendar has UK inflation at 0700 BST.

By Lucy Heming; lucyheming@alliancenews.com

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