London open: Gains for BP, Shell help to limit losses amid Middle East woes
London stocks fell in early trade, while oil prices rallied and gold neared a seven-year high as investors flocked to safe havens amid growing tensions in the Middle East.
At 0830 GMT, the FTSE 100 was down 0.4% at 7,592.45, with gains for oil giants BP and Shell - the standout performers on the index - helping to limit overall losses.
Investors were on edge as they awaited Iran’s response to the US killing last week of a top Iranian general in Iraq.
Over the weekend, Iran announced that it would no longer abide by uranium enrichment limits under the 2015 nuclear deal. In addition, US President Donald Trump threatened Iraq with sanctions after the country’s parliament voted in favour of expelling American forces.
Trump said the US had identified 52 Iranian sites which would be attacked if Iran retaliates for the killing of General Qasem Soleimani.
Oil prices benefited from the conflict amid worries about disruption to supply, with West Texas Intermediate up 1.6% at $64.07 a barrel and Brent crude 1.9% higher at $69.90, having topped $70 earlier for the first time in three months.
Meanwhile, gold prices hit their highest level since 2013, rising to close to $1,600.
Hussein Sayed, chief market strategist at FXTM, said: "While no one knows what will happen next, investors have pushed oil above $70, up $4 since the conflict started, and gold has surged to its highest levels in more than six years.
"In September, a drone attack on Saudi Arabia’s Abqaiq crude-processing plant sent Brent prices 20% higher, but those gains were rapidly reversed as production was quickly restored and markets saw it as a short-term risk event. In the current environment, it’s hard to tell whether we’ll see a larger disruption in oil supplies that could send prices much higher.
"Interestingly, we note some investors are buying call options near $100 to insure or profit from massive price spikes. They are predicting that Iran will target shipping in the Strait of Hormuz, which is responsible for a fifth of the world’s oil supply flow. If this strait is blocked, even for a short period, it will lead to prices skyrocketing. At $70-$80 a barrel, the global economy is not likely to feel much impact from this rise in prices, but as we get closer to $100 there will be severe consequences, which would trigger steep selloffs in equity markets."
Investors were also mulling the latest services data out of China released earlier. The Caixin services purchasing managers’ index came in at 52.5 in December, down from a seven-month high of 53.5 the month before.
On the UK data front, all eyes will be on the Markit services PMI for December.
In equity markets, Hikma Pharmaceuticals was the worst performer after a downgrade to ‘underweight’ at JPMorgan, while Pagegroup was hit by a downgrade to ‘hold’ at Jefferies.
On the upside, online trading platform Plus500 rallied after saying it had seen an improvement in trading in the second half of the year, although earnings and revenue for 2019 were still expected to be lower on the year.
Market Movers
FTSE 100 (UKX) 7,592.45 -0.39%
FTSE 250 (MCX) 21,871.35 -0.53%
techMARK (TASX) 4,194.78 -0.43%
FTSE 100 - Risers
BP (BP.) 503.60p 1.93%
Royal Dutch Shell 'A' (RDSA) 2,337.00p 1.68%
Royal Dutch Shell 'B' (RDSB) 2,341.00p 1.50%
Polymetal International (POLY) 1,226.00p 1.32%
BAE Systems (BA.) 586.20p 0.93%
Next (NXT) 6,950.00p 0.12%
Just Eat (JE.) 867.80p 0.09%
Meggitt (MGGT) 660.00p 0.06%
Halma (HLMA) 2,113.00p 0.05%
Admiral Group (ADM) 2,288.00p -0.09%
FTSE 100 - Fallers
Hikma Pharmaceuticals (HIK) 1,891.50p -4.76%
Morrison (Wm) Supermarkets (MRW) 193.80p -2.66%
International Consolidated Airlines Group SA (CDI) (IAG) 610.20p -2.43%
easyJet (EZJ) 1,349.00p -2.39%
NMC Health (NMC) 1,710.00p -2.29%
Evraz (EVR) 391.90p -2.24%
Standard Chartered (STAN) 707.20p -1.89%
Mondi (MNDI) 1,734.50p -1.84%
St James's Place (STJ) 1,146.00p -1.80%
Smith (DS) (SMDS) 380.60p -1.68%
FTSE 250 - Risers
Plus500 Ltd (DI) (PLUS) 900.80p 5.58%
Finablr (FIN) 170.40p 2.65%
Bakkavor Group (BAKK) 146.80p 2.23%
Wood Group (John) (WG.) 401.00p 2.01%
Galliford Try (GFRD) 168.64p 1.68%
Kainos Group (KNOS) 758.00p 1.61%
Vesuvius (VSVS) 505.50p 1.59%
FirstGroup (FGP) 127.90p 1.51%
Rank Group (RNK) 282.00p 1.44%
Petrofac Ltd. (PFC) 389.20p 1.41%
FTSE 250 - Fallers
Pagegroup (PAGE) 505.00p -3.07%
Investec (INVP) 438.40p -2.64%
Trainline (TRN) 483.00p -2.42%
Vivo Energy (VVO) 118.60p -2.31%
Wizz Air Holdings (WIZZ) 3,810.00p -2.21%
Synthomer (SYNT) 348.00p -2.03%
IntegraFin Holding (IHP) 451.50p -1.95%
Kaz Minerals (KAZ) 532.40p -1.88%
NewRiver REIT (NRR) 199.20p -1.87%
Sanne Group (SNN) 684.00p -1.87%