LONDON MARKETS: FTSE 100 Ends Lower As Oil Sinks To 10-month Low
June 20 2017 - 11:35AM
Dow Jones News
By Carla Mozee, MarketWatch
Pound falls below $1.27
U.K. stocks turned lower Tuesday, with energy stocks hit as oil
prices were pulled into bear-market territory, while bank shares
fell after the head of the Bank of England said he's not inclined
to raise interest rates at this time.
The FTSE 100 fell 0.7% to close at 7,472.71, led by losses among
commodity shares. The index had been higher, lifted when the pound
dropped below $1.27 after BOE Gov. Mark Carney talked down
prospects of an imminent rate hike
(http://www.marketwatch.com/story/boe-chief-carney-too-early-to-lift-interest-rates-2017-06-20)
.
But as the session wore on, oil prices became the dominant
factor driving the market direction, with West Texas Intermediate
oil futures and Brent crude futures sinking by about 3%
(http://www.marketwatch.com/story/oil-hovers-at-seven-month-low-as-investors-weigh-up-supply-issues-2017-06-20).
WTI prices were trading below $44 a barrel. That puts them down
roughly 20% from their most recent high
(http://www.marketwatch.com/story/oil-hovers-at-seven-month-low-as-investors-weigh-up-supply-issues-2017-06-20)
and brings them into bear-market territory.
That dragged down shares of oil producer Royal Dutch Shell PLC
(RDSB.LN) (RDSB.LN) by 2.3% and BP PLC (BP.LN) (BP.LN) shares lower
2.6%.
Oil and gas stocks have a hefty weighting of roughly 14% on the
FTSE 100.
Oil investors remained concerned about oversupply in the global
oil market even after the Organization of the Petroleum Exporting
Countries and other major oil producers in May agreed to extend
production limits into the first quarter of 2018.
"Clearly with crude supply elevated and summer demand not
keeping up, there is reason to believe we could be looking at a
summer of discontent for oil bulls," said IG market analyst Joshua
Mahony.
Weekly U.S. supply data from the American Petroleum Institute is
due Tuesday after the close of European trade.
Read: This is what elite fund managers are watching closely --
and it's not Trump or Brexit
(http://www.marketwatch.com/story/this-is-what-elite-fund-managers-are-watching-closely-and-its-not-trump-or-brexit-2017-06-19)
"The assumption that extended OPEC supply cuts would underpin
the oil price is unravelling by the day. We would expect U.S. crude
to test $40 per barrel before any hopes of a sustainable recovery
in oil prices," said London Capital Group senior analyst Jasper
Lawler.
Bank stocks struggle: Bank shares fell as Carney advocated a
lower-for-longer scenario in interest rates.
"From my perspective, given the mixed signals on consumer
spending and business investment, and given the still subdued
domestic inflationary pressures, in particular anaemic wage growth,
now is not yet the time to begin that adjustment," said Carney in
Tuesday's speech at Mansion House in London.
The bank's Monetary Policy Committee last week voted 5-3 to hold
the key interest rate at a record low 0.25%, an unexpected tally as
analysts had expected at the most one policy maker to vote for a
rate hike.
With interest rates poised to remain lower, bank shares fell.
Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) fell 2.5%, Standard
Chartered PLC (STAN.LN) flipped down 1% and HSBC PLC (HSBA.LN)
(HSBA.LN) shed 0.5%. Royal Bank of Scotland Group PLC (RBS.LN)
(RBS.LN) dropped 0.7%.
"We continue to judge that on balance the committee will be
dissuaded from a rate rise by a continued run of lackluster data,
particularly on the consumer front, between now and the August
meeting. That 'on hold' view is strengthened knowing that the
governor is minded to act cautiously," said Investec economist
Victoria Clarke.
Read:Brexit talks kick off with tussle over $67 billion divorce
bill
(http://www.marketwatch.com/story/brexit-talks-kick-off-with-tussle-over-67-billion-divorce-bill-2017-06-20)
Also: Opinion: Brexit threatens to become a fiasco -- and
investors are in denial
(http://www.marketwatch.com/story/brexit-threatens-to-become-a-fiasco-and-investors-are-in-denial-2017-06-19)
Meanwhile, Barclays PLC (BCS) (BCS) ended down 1.9% after the
U.K. Serious Fraud Office charged the bank and four former
executives with conspiracy to commit fraud
(http://www.marketwatch.com/story/barclays-4-former-top-execs-charged-with-fraud-2017-06-20)
in a case related to fundraising in Qatar during the financial
crisis.
(http://www.marketwatch.com/story/this-is-what-elite-fund-managers-are-watching-closely-and-its-not-trump-or-brexit-2017-06-19)Elsewhere
on the FTSE 100, Wolseley PLC (WOS.LN) said quarterly sales rose
(http://www.marketwatch.com/story/wolseley-quarterly-sales-trading-profit-rise-2017-06-20)and
that it was on track to meet full-year expectations. Shares of the
plumbing and building supplies company ended marginally lower.
(END) Dow Jones Newswires
June 20, 2017 12:20 ET (16:20 GMT)
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