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Oil giants hit amid fears of drop in demand

Published 25/07/2016

The FTSE 100 index was off 20.4 points to 6710.13
The FTSE 100 index was off 20.4 points to 6710.13

Oil majors dragged the London market lower as the price of oil tumbled amid heightened fears over a global supply glut.

The FTSE 100 index was off 20.4 points to 6710.13, as Brent crude sunk 1.9% to 44.83 US dollars (£37.50) a barrel after a report from Barclays warned global oil demand was down amid lacklustre growth from the global economy.

BP dropped 2.6%, or 11.8p, to 440.4p ahead of its interim results on Tuesday, while rival Royal Dutch Shell was also languishing in the red, slipping 2.5%, or 54.5p, to 2093.5p.

Sterling was also under pressure after a report from the Confederation of British Industry (CBI) said b usiness optimism had deteriorated at its fastest pace since January 2009 following the Brexit vote.

The pound paired back gains against the dollar to rise 0.1% to 1.312 US dollars, after the CBI's Industrial Trends Survey revealed optimism had fallen sharply in the wake of the EU referendum result, while expectations that total new orders will rise are at their lowest level since January 2012.

It found 52% of firms were less optimistic about the general business situation compared to three months ago, while 5% of businesses were more optimistic, leaving a balance of minus 47%.

But the report - which surveyed 506 manufacturers between June 27 and July 13 - said output had risen across the sector at its fastest pace in two years.

The update comes after last week's closely-watched Markit Flash UK Composite Output Index showed the UK economy has slumped at its fastest rate since the financial crisis in the wake of Britain voting to leave the European Union.

The pound was also marginally up against the euro at 1.195 euro.

Across Europe, Germany's Dax was up 0.5% and the Cac 40 in France rose 0.2%.

In stocks, shares in betting giant William Hill spiked after it was confirmed a three-way merger with 888 and casino giant Rank could be on the cards.

William Hill rose nearly 5%, or 15.2p, to 328.8p after o nline operator 888 and Rank came clean over their interest in a merger.

The two companies said in a joint statement on Monday: "The consortium sees significant industrial logic in the combination, through consolidation of their complementary online and land-based operations, delivery of substantial revenue and cost synergies and from the anticipated benefits of economies of scale which will accrue to all shareholders."

The move comes after William Hill chief executive James Henderson stepped down last week after the firm was hit by profit warnings and sliding sales under his tenure.

888 and Rank have until August 21 to formally announce their intention to make an offer for William Hill.

The biggest risers on the FTSE 100 Index were 3I Group up 19.5p to 610.5p, Next up 133p to 5005p, Morrison's up 3.9p to 183.8p, Legal & General up 4p to 199.4p.

The biggest fallers were Randgold Resources down 300p to 8550p, BP down 11.8p to 440.4p, Royal Dutch Shell A down 53.5p to 2038.5p, Royal Dutch Shell B down 54.5p to 2093.5p.

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