Oil majors help spare FTSE from heavy drop

In London, Shell closed up by more than 1.5%, while BP gained 0.5%.

Pa City Staff
Tuesday 18 January 2022 17:23
Traders in the City were less negative than their US colleagues on Tuesday (Jonathan Brady/PA)
Traders in the City were less negative than their US colleagues on Tuesday (Jonathan Brady/PA)

Strong performances from the UK’s oil majors helped the FTSE 100 avoid the malaise that beset many of its international peers on Tuesday.

The index avoided the huge drops seen in New York where traders came back from a three-day weekend in a negative mood.

It closed down 0.6% after dropping 47.68 points to 7,563.55.

As Brent crude oil hit a fresh seven-year high, ending the day at 87.03 dollars per barrel, it helped oil companies around the world to buck the trend.

A sharp rise in global bond yields has sent European stock markets into retreat today over concern that higher inflationary pressures will trigger a much more aggressive hiking cycle from central banks around the world

Michael Hewson, CMC Markets

In London Shell closed up by more than 1.5%, while BP gained 0.5%.

Other natural resource companies and telecommunications firms were also among the better performers on the FTSE.

“A sharp rise in global bond yields has sent European stock markets into retreat today over concern that higher inflationary pressures will trigger a much more aggressive hiking cycle from central banks around the world,” said CMC Markets analyst Michael Hewson.

“These concerns have also manifested themselves into European bond markets, helping to push German bond yields to within touching distance of 0%, and their highest levels since the summer of 2019.

“The move higher also raises the prospect that the European Central Bank won’t be able to hold its line of no rate rises this year.

“New seven-year highs for both Brent and WTI oil prices have merely served to reinforce these concerns, as rising geopolitical risks raise the prospect that oil prices might move up towards 100 dollars a barrel in the coming weeks.”

In the US the S&P 500 had dropped 1.5% while the Dow Jones was trading down 1.4% when markets closed in Europe.

The Frankfurt Dax dropped 1% while Paris’s Cac 40 ended 0.5% down.

On currency markets the pound could buy 1.3584 dollars, no change on the day before, or 1.1984 euros, which was a 0.1% rise.

In company news, THG saw its shares drop again on Tuesday, this time giving back 9.6% after cautioning that the start to this year has been challenging.

The business said it is facing higher commodity prices, while the boost the company got from lockdown is no longer helping it out.

Profit margins were lower than expected last year due to rising costs and changes to international exchange rates, the company also warned.

Sales grew nearly 38% last year, but this year they are expected to only rise by less than 25%.

Despite these problems, the company posted record annual sales figures of £2.2 billion.

Shares were largely unaffected when InterContinental Hotels’ chairman Patrick Cescau said he would step down after nine years in the role.

Hotel Chocolat said that its sales rose 37% in the 13 weeks to Boxing Day. Outside the UK the business grew around 130% in both the US and Japan.

Its shares closed the day up 2.9%.

The biggest risers on the FTSE 100 were DCC, up 208p at 6,482p; BT Group, up 5.55p at 186.6p; Pearson, up 16.4p at 632.4p; Phoenix, up 15.4p at 701.4p; and Vodafone, up 2.62p at 121.5p.

The biggest fallers of the day were Ashtead, down 286p at 5,454p; Rightmove, down 31.6p at 658.6p; Unilever, down 145.5p at 3,516.5p; DS Smith, down 15p at 380.5p; and JD Sports, down 6.9p at 189.1p.

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