LONDON MARKET OPEN: Oil Stocks Drag On London While Housebuilders Rise

Wed, 24th Feb 2016 08:39

LONDON (Alliance News) - Stocks in the UK opened lower on Wednesday, with heavyweight oil stocks amongst the biggest fallers in the FTSE 100 after Iran and Saudi Arabia both said production cuts are unlikely, sending oil prices lower.

On Tuesday, Iran and Saudi Arabia ruled out a deal by major producers to cut oil output and data from the American Petroleum Institute showed a further build in crude stockpiles, weighing on oil prices. The API's weekly crude oil stock rose by 7.1 million barrels, having declined by 3.3 million barrels last week.

Furthermore, Organization of the Petroleum Exporting Countries Secretary General Abdalla Salem El-Badri blamed US and Canadian oil companies for the global supply glut that has dragged down crude oil prices. "You can't invest in new production and then expect OPEC to cut production," he said at the annual CERA conference in Houston.

"I don't know how we are going to live together," El-Badri said of OPEC's relationship with non-OPEC producers.

OPEC member Saudi Arabia and Russia have proposed to freeze output at January levels, but analysts say a significant reduction in output is needed to alleviate the global supply glut.

Just after the London stock market open, Brent oil traded at USD32.72 a barrel, compared to USD33.22 at the close on Tuesday. US benchmark West Texas Intermediate was at USD31.07 a barrel before the open Wednesday versus USD31.73 on Tuesday.

This sent BP shares down 1.0% and Royal Dutch Shell 'B' shares down 1.3%.

Oilfield services company Petrofac was performing better, with its shares up 6.4%, the best performer in the FTSE 250. The company confirmed expectations that the loss booked against the Laggan-Tormore project in the UK North Sea hampered results, but stuck to its commitment to maintain its dividend.

"We faced up to the exceptional challenges we encountered and honoured our commitment to our client. With the plant now successfully operational, these issues are finally behind us," said Chief Executive Ayman Asfari.

Petrofac kept its dividend flat in 2015 at 65.80 cents, after it committed to that payout in late 2015.

The blue-chip FTSE 100 index was down 0.7%, or 34.20 points, at 5,923.60.

The FTSE 250 was down 0.4% at 16,171.49 and the AIM All-Share traded flat at 688.32. In Europe, the French CAC 40 was down 0.7% and the German DAX 30 was down 0.5%.

In Asia, the Nikkei 225 index in Tokyo closed down 0.9%, the Shanghai Composite ended up 0.9% and the Hang Seng in Hong Kong closed down 1.2%.

Housebuilders were amongst the best performers in the FTSE 100, with Persimmon leading the gainers up 2.0%, having released upbeat results on Tuesday. Barratt Developments was up 1.3% after it said Wednesday its pretax profit surged by 40% for the first half of its financial year to December 31, after it sold more houses at higher prices, which appears to be continuing into its second half.

The housebuilder posted pretax profit of GBP295.0 million, up from GBP210.2 million for the first half of its previous financial year, whilst revenue was boosted in the half to GBP1.88 billion from GBP1.58 billion, up 19%.

Barratt sold a total of 7,626 homes in the six months to the end of December, up from 6,971 a year earlier, at an average selling price of GBP254,000, up 11% from the GBP229,200 average price in the first half of the prior financial year.

The housebuilder announced an interim dividend of 6.0 pence per share, up from 4.8 pence per share the previous year. Barratt said that under its capital return plan it expects to return a total of 67.8 pence per share over the two-year period to November 2017.

Auto Trader Group was the worst performing stock in the FTSE 250, down 5.9%. Bank of America Merill Lynch said entities owned by private equity fund Apax Europe VII have sold down their stake in digital automotive seller Auto Trader.

Crystal A Holdco Sàrl and Crystal B Holdco Sàrl have together sold a total of 233.6 million shares in the company at a price of 365 pence per share, raising a total of GBP852.8 million. Shares in Auto Trader trade at 364.20p early Wednesday.

International Personal Finance traded down 5.5% after it said its pretax profit was flat in 2015 as the group's revenue fell but customer numbers and credit issued volumes both rose, even as it faces some regulatory issues in its markets.

The FTSE 250-listed home credit lender said its pretax profit for the year to the end of December was flat at GBP100.2 million, as revenue fell to GBP735.4 million from GBP783.2 million. The profit was kept flat despite investments made in its digital business and adverse foreign exchange movements.

The group was also hit by new legislation imposed in Poland and Slovakia. In Poland, it has been forced to create alternative finance products to comply with new lending regulations and similar issues are set to face the business in Slovakia due to new rate-cap rules.

Hedge fund manager Man Group said its pretax profit sunk in 2015 as revenue remained broadly flat and net inflows into its funds slowed.

The FTSE 250 firm said pretax profit fell to USD184.0 million in the year to the end of December from USD384.0 million in 2014, as revenue came in broadly flat at USD1.08 billion. Net management fee revenue rose to USD759.0 million from USD715.0 million, but this was offset by lower performance fees, which dipped to USD326.0 million from USD367.0 million.

The flat revenue performance was exacerbated on the profit line by one-off charges totalling USD216.0 million, up from USD97.0 million the year before, related to acquisitions and disposals it completed.

Man said it will pay a final dividend of 4.8 cents per share, taking its total dividend to 10.2 cents, slightly up on the 10.1 cents it paid a year earlier. Shares in the company traded down 3.7%.

In the economic calendar, the British Bankers' Association publishes UK mortgage approvals at 0930 GMT, before the Confederation of British Industry releases its distributive trades survey at 1100 GMT. US mortgage applications are at 1200 GMT, flash readings of US Markit services and composite purchasing managers' indexes are both at 1445 GMT, new home sales are at 1500 GMT, and the US Energy Information Administration's crude oil stocks are at 1530 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1