LONDON MARKET OPEN: Commodity Stocks Suffer As Crude Prices Retreat

LONDON (Alliance News) - UK shares were lower at the open, with commodity stocks again weighing on London's indices as oil prices slid back again below USD30 a barrel.

The FTSE 100 index was down 1.5% at 5,788.66 points, the FTSE 250 down 1.1% at 15,974.73 and the AIM All-Share down 0.4% at 686.05. In Europe, the CAC 40 in Paris was down 1.6% and the DAX 30 in Frankfurt was off 1.5%.

Oil-related stocks in London were firmly in the red after oil prices retreated again overnight, following news on Monday that Iraq produced crude at a new record high in December.

"The fall in oil prices will make most of the headlines and drive most of the movement in markets today, unless it is reversed for no particularly good reason. The latest driver is the news that Iraqi oil output is strong," said Societe Generale analyst Kit Juckes.

Oil prices retreated on Monday after Iraq announced record-high oil production, feeding into a heavily oversupplied market, Reuters reported. Iraq's oil ministry told the news agency that oil output had reached a record high in December, with its fields in the central and southern regions producing as much as 4.13 million barrels a day, Iraq's government said.

SocGen's Juckes commented: "US production remains the key swing on supply and is what will eventually trigger a turn. But it will take hard news about declining US output to shift the market mood".

North Sea benchmark Brent crude was standing at USD29.46 a barrel after the open, having touched a low of USD29.33 a barrel overnight. Meanwhile, US benchmark West Texas Intermediate was quoted at USD29.39 a barrel, above an earlier low of USD29.36 a barrel.

BP was down 3.1%, Royal Dutch Shell 'A' shares down 3.0%, and BG Group down 2.9%. In the FTSE 250, Tullow Oil was down 4.6% and Cairn Energy down 3.0%.

Miners also were acting as a drag on the blue-chip index, with Anglo American down 3.5%, BHP Billiton down 3.0%, Glencore down 3.0% and Antofagasta down 3.1%.

However, the only two blue-chip gainers also were miners. Fresnillo and Randgold Resources rose 1.0% and 0.6%, respectively, as the gold price continued the rally seen since the start of 2016, quoted at USD1,115.93 an ounce early Tuesday in London.

Shares in air carrier easyJet were down 1.1% after it reported growth in passengers carried and load factor in the first quarter of its financial year, although revenue per seat and ultimately total revenue fell following the terrorist attacks in Egypt and Paris.

The low-cost airline said the number of passengers carried in the quarter ended December 31 increased by 8.1% to 16.1 million, as the load factor rose by 0.6 percentage point to 90.3%. EasyJet said strong revenue per seat performance in October was offset by the terrorist attacks in Paris and the crash of a Russian passenger jet departing the Egyptian resort of Sharm el-Sheikh, resulting in lower demand and yield in November and December.

However forward bookings for the second quarter are showing a "marked improvement" on this, the carrier said. For the first quarter on the whole, revenue per seat was down 3.7% on a constant currency basis.

Total revenue declined 0.1% on the same period the year before to GBP930 million, as revenue generated by increased passenger volumes and higher load factor was offset by reduced revenue per seat and foreign exchange rate movements, the latter of which easyJet said hit results by GBP32 million.

The budget airline added that its expectations for the full year ending September 30 remain in line with market expectations.

Dixons Carphone was among the few gainers in the FTSE 100 at the open but slid back shortly afterwards, down 0.1%. The electronics retailer said it expects pretax profit for its full financial year to be slightly ahead of consensus after achieving growth in line-for-like revenue over the key Christmas trading period.

The company said group like-for-like sales at constant currency rose 5% in the 10 weeks to January 9, with a record Black Friday in late November. Dixons said it now expects group headline pretax profit for the full year to May to be within the range of GBP440 million and GBP450 million, which is slightly ahead of consensus.

Dixons added that the Sprint store trial in the US was successful and that it has signed an agreement with Sprint to fully activate the joint venture for a targeted 500 stores.

Mid-cap Marston's was the biggest gainer in the FTSE 250, up 4.7%. The pub operator and brewer said its trading has been encouraging thus far in its current financial year, with a solid Christmas and New Year period.

The company's Destination and Premium restaurant outlets saw like-for-like sales grow 3.0% over the 16 weeks to January 23, with food sales up 2.5% and drink sales rising 3.4%. For the two-weeks Christmas trading period to January 2, trading was good for the group, with like-for-like sales growth overall hitting 4.9%, despite tough comparatives for the year before.

Asian stocks ended lower on Tuesday, with the Japanese Nikkei 225 index down 2.4%, the Shanghai Composite down 6.4% and the Hang Seng index in Hong Kong down 2.5%.

Wall Street ended lower on Monday. The Dow 30 lost 1.3%, and both the S&P 500 and the Nasdaq Composite fell 1.6%.

In the US corporate calendar Tuesday, iPhone maker Apple and telecom giant AT&T will publish first quarter and fourth-quarter results, respectively, after the US market close.

In the economic calendar Tuesday, Bank of England Governor Mark Carney speaks before the Treasury Committee in the House of Commons at 1045 GMT.

"The leap in financial market volatility since the start of the year is likely to see today's parliamentary testimony...focus on the resilience of the UK's financial sector," said Lloyds Bank senior economist Jonathan Thomas. "Ahead of next week's February Inflation Report, the issue of how macroprudential policy can be used to support the BoE's inflation targeting framework is also likely to be discussed".

In the US, the US Redbook index is due at 1355 GMT, while the US Housing Price Index is at 1400 GMT. US Markit Services and Composite Purchasing Manager's Index readings are due at 1445 GMT, while US consumer confidence data are at 1500 GMT. The US Federal Reserve will start its two-day monetary policy meeting later Tuesday.

By Daniel Ruiz; danielruiz@alliancenews.com

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