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London open: Stocks rebound as oil prices rally
UK stocks rebounded on Tuesday from declines a day earlier as oil prices jumped after Saudi Arabia said it would work with other producers to limit market volatility.
Brent crude rose 0.76% to $36.85 per barrel and West Texas Intermediate crude gained 1.14% to $34.14 per barrel at 0850 GMT.
Saudi cabinet said in a statement that it “seeks to achieve stability in the oil markets and will always remain in contact with all main producers in an attempt to limit volatility and it welcomes any cooperative action”.
Saudi Arabia and several fellow OPEC members agreed with non-OPEC Russia this month to freeze output at January levels but Iran has remained the main obstacle at curbing an oversupplied market as it takes advantage of the recent lifting of its international economic sanctions.
Meanwhile, investors seemed little fazed by another contraction in Chinese manufacturing data. The official purchasing managers’ index on China manufacturing activity fell to 49.0 in February from 49.4in January, surprising analysts who had expected no change. A reading below 50 signals a contraction while a level above that indicates an expansion.
Caixin’s PMI on manufacturing was released the same day, also showing a worse-than-expected drop. The PMI fell to 48.0 in February from 48.4 in January. Economists had pencilled in an unchanged reading.
“Today’s PMIs suggest the economy lost some momentum last month, though Chinese New Year disruptions are probably partly to blame,” said Julian Evans-Prichard, China economist at Capital Economics.
“The upshot is that today’s PMI readings point to some softening in demand, which may explain why the People’s Bank of China decided to cut the required reserve ratio (RRR) for banks by 50bp yesterday.”
Markit’s Eurozone manufacturing PMI was revised higher at 51.2 in February from a flash estimate of 51.0, ahead of analysts’ projections for no change. However it marked a slowdown from the previous month’s reading of 52.3.
UK manufacturing and US PMIs from Markit will be released at 0930 GMT and 1445 GMT respectively. ISM also publishes its manufacturing data at 1500 GMT.
In company news, shares in Barclays declined after it confirmed plans to sell its African business on Tuesday as it announced a drop in full year profit and a cut to the dividend. For the year to 31 December, adjusted pre-tax profit slipped 2% to £5.4bn and the bank announced a £1.45bn provision for PPI misselling.
The London Stock Exchange surged after Intercontinental Exchange confirmed it was considering making a bid for the UK exchange to rival Deutsche Boerse’s.
Glencore slumped as it reported a 32% drop in full year earnings before interest, tax, depreciation and amortisation (EBITDA) to $8.7bn (£6.25bn) due to weaker commodity prices.
Fresnillo was also under the cosh as it posted a 3.5% decrease in EBITDA to $547.5m.
