Friday 23 February 2018

FTSE 100 hits three-year low as oil bites

Skyscrapers in the Canary Wharf business, financial and shopping district of London
Skyscrapers in the Canary Wharf business, financial and shopping district of London

Tara Cunningham

More than £124bn has been wiped off the value of Britain’s biggest companies in the past two weeks, with the FTSE 100 poised to record its worst month since the height of the financial crisis in 2008.

Another wildly unpredictable trading session on Monday catapulted the UK’s leading stock market to highs of 6,009 - a rise of 0.96pc - before it tumbed 1.32pc to close at 5,874.06, its lowest level since December 2012.

The FTSE 100 has fallen 7.8pc in just 14 days due to a large drop in oil prices and investor jitters ahead of the Federal Reserve’s widely expected interest rate hike on Wednesday. Britain’s benchmark index has fallen by 10.5pc this year, and is off by 17.3pc since it touched a high of 7,104 in April.

Commodity stocks became the biggest casualties yesterday as the price of a barrel of Brent crude sank below $35 a barrel for the first time in eight years amid growing concerns the global oil glut could worsen.

Joshua Mahony, an IG analyst, said: “Arguably, the correlation between oil prices and the FTSE is as strong as it ever has been, and with oil breaking towards multi-year lows, this is not a good sign for stocks.”

The prospect of continued over-supply in the oil market, coupled with weak demand, caused energy stocks to falter. BP and Royal Dutch Shell both tumbled more than 2pc.

Mining stocks, which have been hammered by a global commodity price rout, also remained firmly in negative territory. The price of three-month copper on the London Metal Exchange slipped 0.5pc to $4,678.

The sector has been pounded by a slowdown in the Chinese economy. However, trade data from the region over the weekend showed factory output growth reached a five-month high in November.

Nonetheless, shares in international miner Glencore plunged 6.3pc yesterday, while rivals Anglo American and Antofagasta recorded losses of 4.2pc and 3.9pc respectively.

The highly anticipated US interest rate rise has increased investor tension and curbed any risk appetite in global financial markets.

With China allowing the yuan to depreciate and Brent crude prices falling, analysts questionthe pace of further rate rises from the US central bank.

Rebecca O’Keeffe, of Interactive Investor, said: “Nervousness around the Federal Reserve decision is reaching a critical point and while most consider a rate rise on Wednesday inevitable, what may be more important is the guidance Janet Yellen delivers on the intended pace and timing of future rate rises.”

Away from London, financial markets in Europe also had a torrid session, with the CAC in Paris and the German DAX ending down 1.7pc and 1.9pc, respectively. European shares were changing hands at two-and-a-half month lows when markets closed.

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