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Markets slump as oil price crashes below $35
Oil price dives below $35 for the first time in over a decade, sparking falls on FTSE 100 and global markets.
Update: Markets have lurched further into the red as the oil price crashed below $35 a barrel for the first time in 11 years, as a rally in the dollar and news of a jump in the US's gasoline stockpiles hammered the commodity.
The price of a barrel of Brent crude fell a whopping 5% to $34.59, its lowest level since June 2004. Already weighed down by the dispute between Saudi Arabia and Iran that makes any output cut less likely, oil was dealt the double whammy of the biggest weekly rise in US gasoline stocks since 1993, and strong US jobs figures that sent the dollar surging.
The US Automatic Data Processing monthly survey showed 275,000 new private sector jobs were created in December, smashing the 192,000 figure that had been forecast.
The dollar jumped to $1.462 against the pound, its highest level versus sterling since the depths of the financial crisis, as investors speculated the US Federal Reserve could follow December's interest rate rise with a second hike in March. A strong dollar typically hurts commodities like oil as they are priced in the currency.
All major global stock markets were in the red, with commodities stocks the worst performer. Markets were also labouring under fresh fears over slowing growth in China, which allowed the yuan to further weaken and reported disappointing services data, and a spike in geopolitical tension sparked by North Korea's hydrogen bomb test.
The FTSE 100 fell 71 points, or 1.2%, to 6,066, while eurozone markets were also down. The French CAC 40 fell 1.3%, the German DAX 30 was down 1.2%, Spain's Ibex dropped 1.6% and Italy's FTSE MIB dived 2.6% lower. In the US, the Dow Jones dropped 1.1% and the S&P 500 fell 0.9%.
Miners extended their losses at the bottom of the FTSE 100, with the biggest fallers including BHP Billiton (BLT), down 4.9% at 709.4p, Rio Tinto (RIO), which fell 4.8% at £18.47 and Anglo American (AAL), 4.5% lower at 270.4p.
Oil stocks meanwhile tumbled to the bottom of the FTSE 250. Tullow Oil (TLW) dropped 7.1% to 152.7p while Nostrum Oil & Gas (NOGN) was down 5.3% at 378.5p. Among 'small cap' stocks, Premier Oil (PMO) tumbled 17.9% to 35.5p.
North Korea bomb test sparks fears
(10:01) Markets have fallen into the red after North Korea's testing of a hydrogen bomb and renewed fears over China sparked further investor unease in a glum start to the year.
The FTSE 100 fell 49 points, or 0.8%, to 6,088, mirroring falls by other global markets. The French CAC 40 fell 0.8%, the German DAX 30 was down 0.8, Spain's Ibex dropped 0.5% and Italy's FTSE MIB traded 0.7% lower.
The falls came as North Korea tested a hydrogen bomb, heightening geopolitical tension, while the People's Bank of China's move to edge the yuan lower sparked further fears over the health of the world's fastest growing economy.
Investors have endured a difficult start to the year, as a fresh tumble in China's stock market and tensions between Saudi Arabia and Iran have sparked jitters.
'This heady cocktail of concerns was added to overnight in Asia on reports that North Korea has tested a nuclear weapon, further heightening anxiety in a region notorious for friction at a time of heightened economic fragility,' said Michael Hewson, chief market analyst at CMC Markets UK.
On the FTSE 100, miners fell to the bottom of the index on fresh fears over top metals consumer China, which allowed the yuan to weaken further and reported poor services data.
Chip markers were also hit by reports Apple (AAPL.O) was set to cut production of some iPhone models this quarter, with ARM (ARM) dropping 3% to 973.5p.
Energy stocks were also hit, as the oil price reached a fresh 11-year low of $35.78 a barrel, down 1.8% on the day, with Shell (RDSb) dropping 1.1% to £15.19.
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- BHP Billiton PLC (BLT.L)
- Rio Tinto PLC (RIO.L)
- ARM Holdings PLC (ARM.L)
- Royal Dutch Shell PLC (RDSb.L)
- Anglo American PLC (AAL.L)
- Tullow Oil PLC (TLW.L)
- Nostrum Oil & Gas PLC (NOGN.L)
- Premier Oil PLC (PMO.L)
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by Gavin Lumsden on Oct 26, 2016 at 14:01