LONDON MARKET OPEN: BP And Shell Sink On Oil Price Crash

(Alliance News) - Stocks in London dived on Monday as the global spread of the coronavirus showed no signs of abating and the crash in oil prices added to the panic with oil firms taking a hammering, wiping hundreds of billions off valuations.

A swathe of northern Italy was sealed off over the weekend as authorities struggled to contain the spread and impact of the deadly coronavirus.

An area home to a quarter of Italy's population was effectively shuttered - including Milan and Venice - mimicking a lockdown at the disease's epicentre in China. Tens of millions of people are now in virtual quarantine worldwide, but there are fears that the disease will spread further and that disruptions could force several economies into recession.

"The economic impact will be felt through people doing less and lowering economic activity. From a market perspective, traders will be trying to forecast how long it will be until things return back to normal. If this is a few bad weeks or months, then the market will rebound quickly. If sports matches are still being played to empty stadiums in 6-months time, the impact on global share prices will be more long term," said analysts at Vestact, a South African money manager.

The FTSE 100 index was down 570.81 points, or 8.8% at 5,891.74. The FTSE 250 was down 1,201.99 points, or 6.4% at 17,544.52, and the AIM All-Share was down 45.96 points, or 5.4% at 804.98.

The Cboe UK 100 index was down 8.8% 10,061.20. The Cboe UK 250 was down 4.8% at 15,953.66, and the Cboe UK Small Companies was down 0.2% at 11,275.40.

In European equities, the CAC 40 in Paris was down 6.3% and the DAX 30 in Frankfurt was down 7.3%.

In the FTSE 100, not a single company opened in the green on the large cap index's worst day since the 2008 financial crisis.

Oil majors BP, Royal Dutch Shell 'A' and 'B' shares were all down 21%, tracking spot oil prices lower. Shell is London's largest company by market capitalisation, while BP is third biggest.

Brent oil was quoted at USD34.28 a barrel Monday morning, collapsing from USD46.00 late Friday. The North Sea benchmark sank to a low of USD31.26 overnight - its lowest level since January 2016 and suffered its biggest intraday percentage drop since 1991.

Oil plunged after top exporter Saudi Arabia launched a price war in response to a failure by leading producers to strike a deal to support energy markets, Bloomberg News reported, after a failure by cartel OPEC and its allies to reach a deal to cut production.

A meeting of main producers was expected to agree to deeper cuts to counter the impact of the new coronavirus - but Russia refused to tighten supply.

In response, the Gulf powerhouse cut its price for April delivery by USD4 to USD6 a barrel to Asia and USD7 to the US, with Aramco selling its Arabian Light at an unprecedented USD10.25 a barrel less than Brent to Europe, Bloomberg reported.

Saudi state oil giant Saudi Arabian Oil Co, also known as Saudi Aramco, saw its shares drop by 10% as Riyadh's stock market opened on Monday, halting trading.

The Tadawul market only allows stocks to fluctuate by 10% a day, meaning it halted trading as the market opened.

"If a new production compliance agreement between OPEC and Russia is not reached soon, oil prices could speed down to and possibly through the lowest levels of 2015/2016. The hit to oil prices will weaken the US dollar further against the Euro, and perhaps even more so against the Yen," said AxiCorp analyst Stephen Innes.

Informa was down 13% after Deutsche Bank cut the events and publishing company to Hold from Buy.

Tesco was down 3.3%. The grocer agreed to sell its Thailand and Malaysia operations to a combination of CP Group entities for USD10.6 billion on a cash and debt free basis.

The UK supermarket chain said it expects to secure USD10.3 billion upon completion of the transaction, which is expected in the second half of 2020. Tesco also said it will return GBP5.0 billion to its shareholders via a special dividend.

Phoenix Group was down 5.5%. The life insurer and pensions consolidator reported a sharp rise in 2019 profit, with its Standard Life Assurance acquisition delivering synergy targets and its ReAssure Group acquisition on track for completion.

For 2019, the company recorded GBP351 million in pretax profit, 36% higher than the GBP259 million seen in 2018.

Operating profit - a key financial indicator for the group - came in ahead of consensus, rising 14% year-on-year to GBP810 million from GBP708 million. Market consensus had predicted GBP734 million.

In early December, Phoenix agreed to acquire Swiss Re Group's UK business ReAssure Group for GBP3.25 billion. Phoenix confirmed the deal is on track to be completed by mid-2020.

Gold was quoted at USD1,677.42 an ounce Monday morning, up from USD1,665.00 late Friday.

The pound was quoted at USD1.3162 Monday morning, up from USD1.3020 at the London close Friday. The euro was quoted at USD1.1420, up from USD1.1325 late Friday.

The Japanese Nikkei 225 index closed down 5.1%. In China, the Shanghai Composite closed down 3.0%, while the Hang Seng index in Hong Kong closed down 3.9%.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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