The six-day rally on the FTSE 100 Index was brought to an abrupt end today as falling commodity stocks put pressure on miners and oil majors.
Oil prices fell back below the $50 (€36.50) mark as a US government report showed oil reserves were much greater than expected, suggesting a continued decline in demand.
This took the heat out of concerns over Russia’s stand-off with Ukraine over its gas supply and the conflict between Israel and Hamas, and the commodity price falls left the FTSE 131.4 points lower at 4507.5 – a 2.8% plunge.
The FTSE 100 had seen six straight days of gains in a post-Christmas and New Year rebound, but today’s fall wiped out much of the advances seen in the rally.
Energy firms felt the force of the market’s change in mood with Scottish & Southern Energy ending a day on the fallers’ board after it announced plans for a share placing in order to fund possible acquisitions. Shares were down 104p to 1159p – 8% – while rival Centrica was off 7p at 270p.
Progress was also hindered by a 5.5% fall for index heavyweight BP, which fell 30.75p to 523.75p on analyst forecasts of a tough final quarter of 2008. BP denied rumours it was guiding estimates lower.
Elsewhere in the sector rival Royal Dutch Shell fell 62p to 1805p, or 3%.
Miners also suffered falls as they came under pressure after recent gains. Antofagasta saw shares tumble 8%, down 41p to 453.25p and Rio Tinto was off 6%, down 115p at 1812p.
In the retail sector sentiment enjoyed a rare positive boost after the feared sales meltdown failed to emerge.
Marks & Spencer’s worst sales performance for nearly a decade failed to prevent its shares from making strong progress.
The stock added 2% or 5.25p to 244p after its Christmas sales decline missed the worst fears of the City and it announced major cost-cutting plans.
M&S reported a 7.1% fall in UK like-for-like sales, and plans to cut costs with the loss of more than 1,200 jobs and changes to its final salary pension scheme.
Tesco shares were 4.9p higher at 360.3p, but Sainsbury’s slipped 2.5p to 322.75p ahead of a trading update from the supermarket chain tomorrow.
In the second tier, sub-prime lender Cattles slid 5p to 24.5p after it said it planned to reduce new business volumes in 2009. The firm is cutting 1,000 jobs.
And Blacks Leisure dived 5.5p to 26.5p after issuing a profits warning because of poor trading at its boardwear division.
However, shares in bakery chain Greggs edged 79p to 3400p after it said like-for-like sales rose 5.3% in the four weeks to January 3.