MARKET COMMENT: London Closes Mixed As Oil Prices Resume Fall

LONDON (Alliance News) - UK shares gave up their earlier gains Monday as oil prices resumed their slide, while European stocks were boosted by a report setting out the mechanics of a widely anticipated quantitative easing programme by the European Central Bank.

In a day with little fresh economic data, London shares opened higher and maintained their gains for most of the trading session. However, the FTSE 100 and FTSE 250 indices incurred sharp losses after US indices quickly overturned a higher open, though the FTSE 100 managed to recover somewhat in late trade.

The FTSE 100 closed flat at 6,501.42, while the FTSE 250 closed down 0.4% at 15,943.69. The small-cap AIM All-Share managed a gain, however, closing 0.1% higher at 703.92.

Stocks in mainland Europe outperformed London, as talk of ECB quantitative easing drove equities. CNBC reported Monday that the ECB could be set to reveal a program of quantitative easing whereby the amount of sovereign debt to be purchased by the ECB would be determined by the level of contributions made by each national central bank within the eurozone.

The next ECB monetary policy decision announcement and press conference by President Mario Draghi is set for January 22.

The CAC 40 in Paris ended up 1.2%, and the DAX 30 in Frankfurt closed up 1.4%.

At the London close, Wall Street was trading broadly lower. The DJIA was down 0.4%, the S&P 500 and Nasdaq Composite were both down 0.6%. The fourth-quarter reporting season in the US will get underway Monday with the release of aluminium producer Alcoa's fourth-quarter earnings report after the close of US trading.

Oil prices continued their downward path, with Brent falling below USD48 a barrel for the first time since the end of March 2009. At its lowest level of the day, Brent touched USD47.16 a barrel. The US benchmark West Texas Intermediate dropped to its lowest level since late April 2009. WTI hit a low of USD45.88 a barrel.

Oil-related stocks were amongst the biggest fallers in the FTSE 100 and FTSE 250. BG Group, down 3.6%, and Royal Dutch Shell 'B', down 1.6%, were amongst the biggest blue-chip losers. Hunting, down 8.1%, Premier Oil, down 6.7%, John Wood Group and SOCO International, both down 4.9%, Ophir Energy, down 4.8%, and Petrofac and Cairn Energy, both down 4.3%, were amongst the worst mid-cap performers.

Gold miners Fresnillo, up 1.1%, and Randgold Resources, up 1.0%, benefited as gold prices rose towards the end of trade. Gold rose to a high of USD1,231.23 an ounce, the yellow metal's highest level since December 11.

Afren, down 22%, was by far the biggest faller in the FTSE 250, hitting its lowest level since the end of March 2009. The oil and gas explorer said it is considering its options for the Barda Rash field in the Kurdistan region of Iraq after the reserve estimate for the prospect was revised down substantially.

Afren said an updated competent person's report on the Barda Rash field is expected to show a material reduction to its previously-published estimates on reserves and resources. The explorer said it expects the total reserve estimate for the field to be revised down to 250 million barrels of oil from 1.24 billion barrels previously.

AO World, up 6.6%, closed as the best mid-cap performer. The online domestic appliances retailer said website revenue rose 38% in its fiscal third quarter which includes the key Christmas trading period, with sales spiking around Black Friday but remaining strong in the run-in to the festive season. It added that it remains confident that it will meet full-year expectations.

Hikma Pharmaceuticals, up 4.3%, was another big riser in the FTSE 250. The company said it will now prepare to launch its colchicine 0.6 milligram capsules, after Takeda Pharmaceuticals USA Inc failed in its bid to block the distribution of the capsules. The US District Court for Delaware had denied Takeda's motion for a preliminary injunction in relation to the distribution of Hikma's colchicine capsules, and Himka said Monday that Takeda was unsuccessful in appealing this decision.

In the economic calendar Tuesday, Chinese new loans and trade balances data for December will be issued at 0200 GMT. UK consumer and producer price readings for December will be at 0930 GMT. The Kantar Worldpanel will release its latest UK grocery market-share figures for the 12 weeks ending January 4 at 0930 GMT.

In the corporate calendar, supermarket Wm Morrisons Supermarkets will be issuing a trading statement, as will bakery chain Greggs and fund manager Rathbone Brothers. Department store Debenhams, pub owner Spirit Pub Co and self-storage company Big Yellow Group will provide  interim management statements. Building products distributer SIG is scheduled to release a 2014 trading statement, recruitment company Michael Page International will issue a fourth quarter trading statement, and ASOS will release a Christmas press statement.

By Neil Thakrar; neilthakrar@alliancenews.com

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