MARKET COMMENT: Oil Stocks Weigh On Indices As Brent Hits 4-Year Low

LONDON (Alliance News) - UK stocks are lower Tuesday morning, with oil stocks weighing on indices after the price of Brent oil hit a fresh four-year low.

At mid-morning, the FTSE 100 is trading down 0.3% at 6,467.25, the FTSE 250 is down 0.1% at 15,441.01, and the AIM All-Share is down 0.2% at 718.33.

European stocks are mixed, with the CAC 40 down 0.2% and the DAX 30 up 0.1%.

Shares in oil companies have dropped as the price of Brent oil slid to a fresh four-year low at USD82.05 per barrel. Numis analyst Sanjeev Bahl says the drop is due to the cut in prices by Saudi Arabia to the US and the strength of the US dollar.

"The price cut was seen as further evidence of Saudi?s efforts to fight for market share in the world?s largest oil consumer while raising prices to Asia and Europe," Bahl says.

Tullow Oil, down 3.9%, is the biggest decliner in the FTSE 100, while both Royal Dutch Shell shares are down close to 2.5%. BG Group, down 2.5% and BP, down 2.2%, are also amongst the worst performing stocks in the index, while Premier Oil, down 4.6%, and Cairn Energy, down 4.4% are the biggest fallers in the FTSE 250.

Imperial Tobacco Group is the best performing stock in the FTSE 100, gaining 2.9%. The company reported a fall in both volume and revenue in its last financial year, but its pretax profit rose as it continued to strip out costs across the business.

The group said Tuesday that it has now completed its stock optimisation programme, and that led to a decline in both total tobacco volume and revenue in the financial year ended September 30. Its pretax profit for the year rose to GBP1.52 billion, up from GBP1.22 billion the prior year, as its stripped out costs in the business as part of its cost optimisation programme. Last year's results were also knocked back by a GBP580 million impairment charge.

Legal & General Group shares have gained 1.3% after it reported a jump in net cash generation in the first nine months of the year, boosted by cash generation at the operating level. In a statement, the savings and investments business reported GBP827 million of net cash generation in the first nine months of the year, compared with GBP740 million in the corresponding period last year. Operational cash generation rose by 8% to GBP844 million.

Student accommodation company Unite Group is one of the top gainers in the FTSE 250, up 2.0%, after it said it is performing well across all parts of its business, with a strong lettings performance for the new academic year, and said it expects to meet its earnings per share target on its net asset value early.

UK construction growth slowed more than expected in October, according to results of a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics. The seasonally adjusted Markit/CIPS construction purchasing managers' index fell to 61.4 in October, from 64.2 in September. This was below the 63.5 reading expected by economists, and indicated the slowest expansion in five months, though the expansion was more than the long-run survey average. This also marked the eighteenth consecutive month of expansion.

The slowdown was partially down to residential buildings, which posted its weakest growth in 12 months. Some survey respondents commented that less favourable housing market conditions had resulted in greater caution among clients and delays to the launch of new development projects, the report says.

Eurozone producer prices rose for the first time in three months in September, Eurostat reported. Producer prices gained 0.2% in September from August, when prices fell by 0.2%. Economists had forecast prices would remain flat in September. Excluding energy, producer prices slid 0.1% month-on-month. Energy prices advanced 1% reversing a 0.5% fall in the prior month.

In addition, the European Commission slashed its growth and inflation forecasts for the euro area, citing the weak economy and slow improvement in the employment situation. In its Autumn Economic forecast, the European Commission lowered the growth forecast for 2015 to 1.1% from 1.7% predicted in May. The outlook for this year was cut to 0.8% from 1.2%.

Still to come on Tuesday is US trade balances for September and US factory orders for October, at 1330 GMT and 1500 GMT, respectively.

Futures indicate a lower open on Wall Street, with the DJIA, S&P 500, and Nasdaq Composite all pointed down 0.3%.

By Neil Thakrar; neilthakrar@alliancenews.com

Copyright 2014 Alliance News Limited. All Rights Reserved.