London midday: Oil majors, miners knocked down as commodity prices drop

Alexander Bueso Sharecast | 09 Mar, 2017 12:21 | | |

dominos pizza
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Ahead of Thursday's ECB action, London's shares were trading near their lowest levels of the session around noon as a drop in oil and metals futures piled on the pressure.

As of 1131 GMT the FTSE 100 was down 0.69% or 50.52 points to 7,284.32, while the FTSE 250 was slipping 0.42% or 80.22 points to 18,850.79. In parallel, cable was steady, drifting just 0.04% lower to $1.2160.

Acting as a backdrop, better-than-expected bank lending data out of China for the month of February failed to lift the mood.

The rate of growth in so-called Total Social Financing - the preferred measure of credit of China's central bank - was steady at a 12.8% year-on-year as new bank lending jumped from 1,170bn yuan in January to 2,030bn yuan for February (consensus: 950bn yuan). Nonetheless, some economists were dismissive of the data, expecting higher lending rates going forward to eventually weigh on economic growth.

WTI falls below $50 for first time since December

After a large overnight drop in crude oil futures, front month West Texas Intermediate crude oil futures were down again by 1.57% to $49.50 a barrel.

Crude prices fell 5% on Wednesday, which unnerved some traders; on Wednesday the US Department of Energy reported that America's oil output had bounced back to 9.09m barrels a day, with a further gain to a record 9.73m expected in 2017.

Copper prices on COMEX were also down, retreating 1.40% to $2.5640 per pound on COMEX, with traders bracing for weekly US jobless claims data ahead of Friday's monthly US jobs report.

Indeed, the latter might stoke further gains in the US dollar, weighing on the likes of both oil and copper.

ECB in focus

Nonetheless, the day's main event would be the ECB's policy meeting and follow-up press conference from its chief Mario Draghi.

Although no major policy changes were anticipated, traders were well aware of Mario Draghi's propensity for often surprising markets in one manner or another.

Economists at JCRA said Draghi has "a major problem", as the ECB will be announcing new inflation forecasts this week and the 1.3% forecast made in December "now looks absurd".

They suggested Draghi may take a leaf out of Mark Carney’s book and go for a ‘look through’ solution, even though a Germany buoyed by the increase in its industrial production figures will be looking for a reversal in tone.

On the other side of the argument, Craig Erlam, senior market analyst at OANDA mused: "The ECB will also likely want to keep a low profile ahead of the upcoming elections in the Netherlands and France. The most popular parties in these countries are strongly anti-euro and want to pull their respective countries out of the currency union.

"The last thing Draghi will want to do is rock the boat ahead of these crucial votes, especially if there’s absolutely no reason to do so. That said, in the press conference after, we may get some insight into what the central bank intends to do later this year when the current quantitative easing program expires. This is what will create waves in the markets, assuming he gives anything away of course."

Investors lose taste for pizza

Domino's Pizza served up a tasty looking set of final results for last year but the shares were sliced down to size due to the lukewarm start made to 2017. After growing like-for-like sales 7.5% in the 52 weeks to 25 December, the company reported LFL sales growth of just 1.5% in the UK for the first nine weeks of the new financial year.

JP Morgan Cazenove has upgraded Admiral to an 'overweight' recommendation to reflect the non-life insurer's strong growth potential recent share price weakness. Identifying the recent share price as an "attractive entry point into what remains a best-in-class insurer", the broking arm of the bank increased its December target price to 2,100p from the previous 1,900p.

Helped by a strong fourth quarter, Morrisons grew annual like-for-like sales and underlying profits before tax for the first time in five years and declared a 3.85p final dividend to celebrate. LFL sales jumped 2.5% in the three months to 29 January, lifting the year's total to 1.7% and turnover up 1.2% to £16.3bn. Shares in the grocer dropped, however.

Aviva was the top riser on the Footsie as the insurer said it was making a £380m charge to account for the change in the Ogden rate – the discount on personal injury claim payouts – as it revealed full year operating profits up 12% to £3bn.“Fund management delivered a breakout year with strong positive net flows and operating profit up 30%. General insurance is growing, with operating profit up 17%1, and in UK Digital we have doubled online registrations to five million.
We are becoming a digital disruptor for the benefit of our customers,” the company said. The total dividend is up 12% to 23.3p.

Oil giant Royal Dutch Shell is to sell all of its oil sands interests in Canada and reduce its share in the Athabasca oil sands project to 10% from 60% for $7.25bn.Shell will remain the operator of Athabasca’s Scotford upgrader and the Quest carbon capture and storage project. It's shares were down, however, on the big drop in crude prices.

Cheaper oil was a boon for others, with airlines easyJet and International Consolidated Airlines both flying towards the top of the leaderboard.

Market Movers

FTSE 100 (UKX) 7,277.48 -0.78%
FTSE 250 (MCX) 18,842.31 -0.47%
techMARK (TASX) 3,442.06 -0.02%

FTSE 100 - Risers

Aviva (AV.) 543.50p 6.36%
easyJet (EZJ) 970.00p 3.19%
Admiral Group (ADM) 1,882.00p 2.90%
International Consolidated Airlines Group SA (CDI) (IAG) 561.50p 2.46%
Croda International (CRDA) 3,659.00p 1.50%
Barratt Developments (BDEV) 533.50p 1.14%
Taylor Wimpey (TW.) 190.90p 1.06%
Paddy Power Betfair (PPB) 8,500.00p 0.95%
Capita (CPI) 529.00p 0.86%
Royal Mail (RMG) 403.60p 0.72%

FTSE 100 - Fallers

BHP Billiton (BLT) 1,247.50p -5.92%
Morrison (Wm) Supermarkets (MRW) 233.80p -5.34%
Anglo American (AAL) 1,152.50p -4.32%
Glencore (GLEN) 308.45p -3.20%
Royal Dutch Shell 'A' (RDSA) 2,060.00p -3.10%
Royal Dutch Shell 'B' (RDSB) 2,157.50p -3.06%
Old Mutual (OML) 222.60p -2.84%
Hargreaves Lansdown (HL.) 1,312.00p -2.38%
Rio Tinto (RIO) 3,184.00p -2.36%
Antofagasta (ANTO) 760.50p -2.31%

FTSE 250 - Risers

Dignity (DTY) 2,410.00p 4.97%
Cobham (COB) 133.30p 4.88%
Ultra Electronics Holdings (ULE) 2,241.00p 3.13%
Just Eat (JE.) 577.50p 2.58%
Ladbrokes Coral Group (LCL) 123.80p 2.23%
NMC Health (NMC) 1,840.00p 1.83%
Inmarsat (ISAT) 754.50p 1.55%
CMC Markets (CMCX) 130.60p 1.48%
Bovis Homes Group (BVS) 821.00p 1.36%
Hill & Smith Holdings (HILS) 1,264.00p 1.28%

FTSE 250 - Fallers

Domino's Pizza Group (DOM) 330.40p -16.14%
Ferrexpo (FXPO) 140.10p -7.59%
Kaz Minerals (KAZ) 454.30p -6.75%
Tullow Oil (TLW) 248.50p -5.33%
Petra Diamonds Ltd.(DI) (PDL) 135.10p -4.99%
Jupiter Fund Management (JUP) 407.50p -4.63%
Vedanta Resources (VED) 809.00p -4.20%
Hunting (HTG) 531.50p -3.97%
Evraz (EVR) 215.50p -3.71%
Weir Group (WEIR) 1,846.00p -3.35%

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