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Market sinks deeper into the red as commodity stocks come under fire

Published 29/11/2016

The FTSE 100 Index was down 50.5 points at 6749.02
The FTSE 100 Index was down 50.5 points at 6749.02

The London market sank deeper into the red as commodity stocks came under fire over fears that major oil producers will fail to secure a deal to curb production.

The FTSE 100 Index closed down 27.47 points at 6,772, as energy and mining stocks bore the brunt of the investor jitters following reports that Opec members were at loggerheads ahead of Wednesday's meeting in Vienna.

Copper mining giant Antofagasta was the biggest faller on the top flight, down nearly 4% or 28.5p to 700p, after it emerged that Iran and Iraq had failed to reach an agreement with Saudi Arabia over how best to cut production.

Oil majors were also taking a hit, with Royal Dutch Shell B and BP falling 40.5p to 2,031.5p and 9.7p to 442.6p respectively.

Brent crude sank two dollars and 23 cents - or 4.6% - to 46.01 US dollars a barrel.

Connor Campbell, financial analyst at Spreadex, said Wednesday's meeting in Vienna "may well be pointless".

He said: "It was comments from the Iranian oil minister that first sparked Brent Crude's 3.5% fall, Bijan Namdar Zanganeh claiming that his country will not accept a cap on its output, with Bloomberg reporting that in turn Saudi Arabia would refuse to sign any deal.

"Reuters then claimed that Iran and Iraq have effectively told the Saudis to absorb the output cut on their own; an aggressive stance that surely means that the Wednesday Viennese get-together is over before it has even begun."

European banking stocks were enjoying a reprieve after the European Central Bank (ECB) said it would step up its purchase of Italian government bonds to rein in any market turbulence following Sunday's referendum.

A Yes vote from the Italian public on December 4 would hand powers back to Italy's regions, making parliament's lower house - the Chamber of Deputies - more powerful than the Senate.

However, a No vote could be enough to topple Prime Minister Matteo Renzi's government, creating a potential wave of economic uncertainty.

Germany's Dax was up 0.4%, while the Cac 40 in France rose 0.9%.

UK lenders were subdued ahead of Wednesday's results from the Bank of England's stress tests, with the Royal Bank of Scotland closing up 0.8p to 197p and Lloyds Banking Group edging down 0.2p to 57.7p.

On the currency markets, the pound raced ahead after the Bank's money and credit report showed the number of mortgages being approved for homebuyers had hit a seven-month high in October.

Some 67,518 home loans for house purchase got the go-ahead, marking the highest figure since March.

Sterling was up 0.7% against the US dollar at 1.250 and rose 0.6% versus the euro at 1.176.

In UK stocks, the housebuilding sector was riding high following the mortgage market update from the Bank, with Barratt Developments rising more than 2% or 10.6p to 476.1p.

BT was up more than 1%, or 4.1p to 354.4p, despite being ordered to legally separate its Openreach network arm after failing to address competition concerns voluntarily.

Telecoms watchdog Ofcom said it was "disappointed" with BT's proposals since it outlined plans in July to make Openreach a "distinct company" within the BT Group.

The biggest risers on the FTSE 100 Index were ITV up 4.5p to 171.2p, Next up 119p to 4,939p, Barratt Developments up 10.6p to 476.1p, Micro Focus International up 43p to 2,124p.

The biggest fallers on the FTSE 100 Index were Antofagasta down 28.5p to 700p, Fresnillo down 44p to 1,234p, BHP Billiton down 41p to 1,313.5p, Mediclinic International down 20p to 702.5p.

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