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London open: Stocks little changed but energy issues gain on oil rally
Stocks in London were little changed in early trade as investors continued to digest OPEC’s agreement to cut oil production.
At 0830 GMT, the FTSE 100 was down 0.1% to 6,779.40. Meanwhile, oil prices continued to push higher after members of the Organization of the Petroleum Exporting Countries agreed on Wednesday to reduce production by 1.2m barrels a day to 32.5m barrels from January next year.
West Texas Intermediate was up 0.5% to $49.69 a barrel and Brent crude was up 8.8% to $50.47.
Lee Wild, head of equity strategy at Interactive Investor, said: “Crucially, oil majors and index heavyweights BP and Shell remain in favour as traders buy into OPEC’s unlikely deal to tackle oversupply. Brent crude extended gains above $52 a barrel to five-week highs, but, while actually agreeing an output cut is great news, it’s questionable whether a 1.2 million barrel a day reduction is enough to keep oil prices much above $50.
“Past experience also tells us that getting everyone to play by the new rules is another matter. An agreed cut by non-OPEC member Russia is encouraging, although, in truth, it had very little to lose given current production is running at record levels.”
On the corporate front, oil giants BP and Shell racked up healthy gains as oil prices rallied. BP was also boosted by an upgrade to ‘outperform’ from ‘neutral’ from Credit Suisse.
Anglo-Swiss miner Glencore was on the front foot after it said its plan to reduce debt as resources prices retreat is near completion, and the company intends to return $1bn to its shareholders next year.
Rio Tinto pushed higher as it confirmed that it is cooperating with inquiries from the relevant authorities relating to the impairment included in the company’s 2012 accounts in respect of Rio Tinto Coal Mozambique.
The statement followed a press report in earlier in the week stating that the company was facing an investigation by the US Securities & Exchange Commission on the timing of the $3bn in impairment charges.
FTSE 250 service company Serco gained ground after reiterating its outlook for next year as it said it should move into the ‘growth’ phase of its transformation plan in 2018 and announced a £600m contract with Barts Health NHS Trust for the provision of soft facilities management services.
Residential property business Grainger edged down despite posting a jump in annual profit and hiking its dividend.
Daily Mail & General Trust was in the black as it reported a drop in adjusted pre-tax profit and operating profit but a rise in revenue for the year, with results ahead of expectations overall.
Great Portland Estates nudged lower after saying it has let a further 25,200 sq. ft. of office space in its recently completed development at 30 Broadwick Street, London W1.
Investors in London were also digesting the latest data from building society Nationwide, which showed annual house price growth slowed a touch in November. Prices were up 4.4% from a year ago compared to a 4.6% increase last month.
On the month, prices were up 0.1%, while the average cost of a home was £204,947.
Robert Gardner, Nationwide’s chief economist, said: “There are some signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs.”
Still to come on the data calendar, UK manufacturing PMI is at 0930 GMT. In the US, initial jobless claims are at 1330 GMT, while ISM manufacturing and construction spending are at 1500 GMT.
