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Energy Insights: Energy News: Shock Russia-Saudi oil deal sends Brent plunging and stalls FTSE rally

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Shock Russia-Saudi oil deal sends Brent plunging and stalls FTSE rally



European stock markets close in the red after Saudi Arabia and Russia agree to freeze output at January levels

Saudi Arabia and Russia agree to freeze output at January levels. 

Recap: Another torrid Tuesday

  1. Oil rallied by as much as 6pc on false hopes of a production cut
  2. Asian stock markets made gains on oil price surge
  3. European markets opened higher, extending Monday's gains
  4. The rebound in equities was short lived
  5. At 9am, Russian, Venezuelan, Qatari and Saudi Arabian oil ministers reached a deal to not exceed production from their January levels
  6. Brent crude slumped, falling by more than 3pc to just above the $32 a-barrel mark
  7. European bourses tumbled into negative territory
  8. Investors disappointed by deal as it did not involve Iran and is contingent on other producers joining in
  9. Wall Street opens higher after being closed on Monday for a public holiday - Dow Jones rises 1pc
  10. Europe closes mostly in the red, with the DAX down 0.8pc, CAC -0.1pc, IBEX -0.5pc. FTSE bucks trend to advance 0.7pc.

Market Report: Change of heart puts Standard Chartered on back foot

Standard Chartered plunged to the bottom of the blue-chip index after Investec was forced to backtrack onFriday's rating upgrade.

While investors worldwide dumped banking stocks last week amid concerns about the health of the sector, Investec made the bold move to upgrade the Asian-focused bank, due to its valuation.

However, two trading sessions later, the broker reversed its decision to upgrade, downgrading the stock to “hold”, after it rallied “hard”, by more than 17pc since Thursday.

“We are now forced, somewhat hastily, to recommend that investors take profits or cut losses,” said Ian Gordon, of Investec.

While Mr Gordon admits “not much has changed” since Friday, a weak earnings outlook has constrained the broker’s enthusiasm.

Although Investec believes Standard Chartered’s capital position will “prove adequate”, it remains concerned about revenues. The broker has already forecast a 14pc slump in revenues for this year.

The outlook for impairments also remains “highly uncertain”, Mr Gordon added, with persistent oil- price volatility driving “sudden short-term moves in sentiment”.

Separately, in another bearish note, Morgan Stanley cautioned investors: “Asset quality outlook for Asian banks has worsened since Standard Chartered’s strategic review,” due to slowing economies, lower commodity and property prices.


The UK-listed bank closed down 24.2p – or 5.3pc – at 428.9p. Its peers enjoyed gains, with Royal Bank of Scotland 1.5pc higher at 250p, Lloyds up 1.2pc to 60.6p and HSBC 0.4pc better at 448.2p.

Barclays also climbed 0.4pc to 161.5p after Investec reaffirmed its “buy” rating, as it expects the FTSE 100 stock to deliver “a very healthy rebound” in the next 12 months.

Away from the banking sector, it was another wildly volatile trading session across Europe, after Russian and Saudi Arabia oil ministers failed to reach an agreement to cut production. Instead, the top oil exporters agreed to freeze oil production at January levels.

However, with the deal contingent on other producers joining in and Iran absent from yesterday’s meeting in Doha, oil prices slumped, following a brief morning rally amid false hopes of a production cut.

The resumption in the oil price slide weighed on European stock markets, with Frankfurt’s DAX closing down 0.8pc and the CAC in Paris losing 0.1pc.

Alastair McCaig, an IG analyst, said: “Considering the Saudi oil minister was not the driving force behind today’s meeting it should not come as too much of a surprise that results have underwhelmed expectations.”

Oil majors eased off intraday highs. Royal Dutch Shell B shares edged 1.6pc higher to £15.65, while BP added 1.4pc to 337.4p. On the mid-cap index, the 3.7pc fall in Brent prompted Tullow Oil and Amec Foster Wheeler to falter – down 2.9pc and 7pc, respectively.

Meanwhile, the latest fall in oil lifted British Airways owner IAG rose 2.8pc to 508.7p and low-cost carrier easyJet advanced 2pc to £15.38.

Back in London, the FTSE 100 partly surrendered gains of 1pc made in early trade, to finish the day up 37.89 points – or 0.65pc – at 5,862.17.



The FTSE 100 suffers another volatile trading session.

The theme of unpredictability dominated trading across the mining sector. Anglo American shifted its position from FTSE leader to laggard, swinging from gains of 7.7pc to losses of 8.4pc, before closing at 398p – a daily gain of 1.3pc. The world’s fifth biggest miner posted an annual loss of $5.6bn and announced plans to sell its iron ore, coal and nickel units as it fights for survival in the face of collapsing commodity prices.

Nick Hatch, of Canaccord Genuity, cautioned: “Anglo American will likely be seen as a forced seller and a price-taker by potential asset acquirers, and the company will need to tread carefully with government and labour, particularly in South Africa, where it plans to exit a substantial asset base.”

Its peers endured a mixed trading session, with Glencore 1.7pc higher at 103p, Antofagasta down 0.5pc at 440.6p and BHP Billiton off by 0.1pc at 693p.

Pharma group Shire also lost ground, down 57p, or 1.5pc, to £37.40, after JPMorgan Cazenove slashed its price target. Separately, boss Flemming Ornskov snapped up 1,300 American depositary shares at $160.30.

On the other side, theme park operator Merlin Entertainments climbed to the top of the blue chip index, 13.2p – or 3.3pc – higher at 415p, after it named Anne-Francoise Nesmes, formerly of Dechra Pharmaceuticals, as its new chief financial officer.

Electrical engineering group Spectris posted its sharpest daily gain since April 2013 following a reassuring set of full-year results. Annual pre-tax profits of £176.3m and sales of £1.2bn were in-line with market expectations. The FTSE 250 stock jumped 133p - or 8.8pc - to £16.48.

Ahead of its full-year results next week, Ladbrokes rose 4.4p - or 3.8pc - to 121.1p after a bullish note from Numis forecast pre-tax profits of £48m. The broker also expects “encouraging news and a sunny tone” on the betting firm’s shape following its acquisition of Coral.

Finally, Aim-listed Digital Globe Services ticked up 18.2pc to 60p following robust results in the final six months of the year. The online marketing company said its revenue for the year of around $45m will mark its strongest 12 months in the group’s history.

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