14th Jul 2015 09:47
LONDON (Alliance News) - UK stocks are trading flat to lower mid-morning Tuesday, as crude oil prices take a hit after Iran and foreign ministers from six major world powers reached a comprehensive agreement to alleviate concerns over Tehran's controversial nuclear programme.
Curbs in Iran's nuclear capacity, together with intrusive international inspections, are aimed at preventing Iran from misusing plutonium waste or uranium reactor fuel for making warheads.
In return, US and EU embargoes against Iran's oil exports and its international banking ties will be lifted. The prospects of an even greater supply of oil onto the market has sent crude oil prices lower, with Brent oil now trading at USD56.69 a barrel and US benchmark West Texas Intermediate at USD51.12 a barrel.
However, Norbert Ruecker, head of commodities research at Julius Baer believes that the deal should not see a large sell-off in oil futures, as the talks have been persistent background market noise for some time now.
"Iranian exports are unlikely to resume at substantial volumes before next year and thus won't move the needle much on today's oversupply," Ruecker says. "Longer term, Iran's return is set to keep oil prices lower for longer, alongside ever-cheaper shale oil and peaking Western world oil demand."
The FTSE 100 trades fractionally lower at 6,736.02, the FTSE 250 is down 0.4% at 17,642.40, and the AIM All-Share is down 0.1% at 752.05.
In Europe, the CAC 40 in Paris is down 0.2% and the DAX 30 in Frankfurt is down 0.4%.
UK inflation returned to zero in June, data published by the Office for National Statistics showed. Consumer prices remained flat on a yearly basis in June as expected by economists after rising 0.1% in May. The consumer price index remained flat on a monthly basis as well, in contrast to a 0.2% increase in May and a 0.1% rise forecast by economists.
"Continuing falls in food and clothing have kept a lid on CPI growth in the UK, and with oil markets looking ripe for fresh falls, the prospect of more months of negative inflation are also in sight, which will complicate matters for the Bank of England. The rationale for a rate rise is still looking flimsy, especially given the Fed's unwillingness to move on the subject," says Chris Beauchamp, senior market analyst at IG.
Greece also remains in the spotlight as Prime Minister Alexis Tsipras faces a showdown with members of his Syriza party and coalition partners, who are angered by his capitulation to European demands for the most sweeping austerity package in the history of the common currency.
Tsipras' coalition is in disarray over a preliminary deal brokered in Brussels that keeps the beleaguered Greek economy in the eurozone but bypasses many of the campaign pledges on which Syriza swept to power. A meeting of party members was held Tuesday morning to assess hurdles to parliamentary ratification of the deal, as labour unions and political factions promised strikes and demonstrations in protest of renewed austerity measures.
Before formal negotiations can begin on up to EUR86 billion in bailout funds, the Greek parliament must agree to legislate on a raft of measures that are even tougher than those rejected by more than 61% of Greeks in a July 5 referendum.
On the corporate front, Sky is the biggest gainer in the FTSE 100, up 2.6%, after Deutsche Bank upgraded it to Buy from Hold. The bank says it believes the broadcaster is best positioned in Europe to capitalise from the acceleration in online video growth. However, ITV is down 1.2% after Deutsche cut it to Sell from Hold.
International Personal Finance is the best performer in the FTSE 250, up 4.9%. The lender's shares dived 25% on Monday after it warned there could be financial consequences for it as a result of potential legal changes in Poland that could result in a cap that covers a broader definition of non-interest costs than previously suggested.
Panmure Gordon upgraded the company to Buy from Hold saying the decline in share price on Monday in response to the company's announcement looks to have more than priced in the potential impact of the potential Polish changes.
Carillion, up 1.9%, said it performed in line with its expectations in the first half of 2015 and said its forecasts for the full year remain unchanged.
The construction and facilities management company said it has seen a significant year-on-year improvement in revenue in the half, with good progress made on contract mobilisations. It said it remains on track to deliver a robust rise in revenue for the full year and said its profit and earnings are both in line with its expectations.
In a separate statement, Carillion said it has won a GBP80 million contract with FTSE 100 oil major BP to build the operational base and accommodation complex for the Khazzan gas project in Oman.
Recruiter Michael Page International is down 2.3% as said its gross profit increased in the first half of 2015, even as its results were held back by currency translation effects in Europe. Michael Page said its gross profit in the first half to the end of June was up by 6.6%, though it rose by 10.8% in constant currencies. The greatest currency translation drag for the company came in its Europe, Middle East and Africa business, where its reported gross profit rose by only 1.6%, but was up by 11.8% in constant currencies.
Still ahead in the economic calendar is US retail sales at 1330 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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