Britain's top equity index resumed its fall yesterday, giving back half the gains made in the previous session, as investors reckoned with reduced earnings expectations for oil companies after a slump in oil prices.
The blue-chip FTSE 100 index closed down 43.22 points, or 0.7 per cent, at 6,267.07 points, after rising 114 points on Friday.
The FTSE has been volatile in recent weeks, hitting a 15-month low on Thursday. Investors have been unnerved by weak European economic data just as the US Federal Reserve winds down its equity-friendly asset-purchase programme.
Energy shares knocked 23.8 points off the FTSE as lower oil prices led analysts to cut some companies’ profit forecasts.
Brent was down 136 cents at $84.80/barrel after falling close to a four-year low at $82.60 last week, hit by weakening demand at a time of ample supply.
Goldman Sachs cut its earnings estimates for the oil services sector by 18 percent to 22 per cent, leaving the bank 20-25 per cent below consensus.
Oil explorer Petrofac fell 2.8 per cent as Goldman, Societe Generale and Natixis cut their target prices for the company. Gas major BG Group slid 3.8 per cent. Royal Dutch Shell’s two listings dropped 2.3 per cent.
Chip-maker Arm Holdings was also among top fallers, down 2.7 per cent, before its trading update tomorrow, with analysts at Bernstein recommending that clients sell the stock “short” in anticipation of weak numbers.
Intercontinental Hotels Group, also due to report tomorrow, rose 4.3 per cent, with traders saying a major investment bank was advising investors to buy the shares before the results’ publication.
Supermarket chain Tesco, whose shares have slumped some 20 per cent over the last month after it said its profits had been overstated, beat the broader market downturn to rise 2.7 per cent, making it the best-performing FTSE stock in percentage terms.
Traders attributed yesterday’s gain to a report in The Times that private equity companies were planning to make offers for Tesco’s £9bn Asian business, and to a Sky News report that Tesco’s accounting black hole would be smaller than originally stated.
Small-cap Spirit Pub Company surged 9.6 per cent to 97.75 pence after it said its board was in talks with brewer and pub owner Greene King on a revised 109.5 pence-per-share takeover offer.