24th Oct 2016 10:57
LONDON (Alliance News) - UK stocks lost their early vigour by midday on Monday, trading only slightly higher as prospects for an oil output deal by OPEC seem to dim.
Russia's energy minister met with counterparts from Saudi Arabia and other Arab Gulf oil-producers on Sunday, amid OPEC's drive to win cooperation from the biggest supplier outside the group in limiting output in order to lift prices, Bloomberg reported.
Ministers from Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates gathered in Riyadh for oil talks at the offices of the Gulf Cooperation Council secretariat, said the financial news agency. Oman was the only one of the GCC's six members not attending.
However, Joshua Mahony, market analyst at IG said Iraq has cast doubt on a potential deal.
"Iraq has thrown the latest spanner in the works for the chances of the OPEC production cut, with OPEC's second-largest producer claiming that their fight against Islamic militants should make them exempt from any cuts," Mahony said.
"With Russia and now Iraq both backing down from previous plans to reduce output, it seems this unlikely deal has already begun unravelling less than two months after its announcement," the IG analyst added.
Brent oil pulled back from its intraday high of USD51.98 a barrel to trade at USD51.60 a barrel at midday Monday in London. This leaves crude almost unchanged from the USD51.62 a barrel seen at the London equities close on Friday.
Having traded much higher at the open, the FTSE 100 index was up just 3.00 points at 7,023.47. The FTSE 250 was flat at 17,933.25 and the AIM All-Share was flat at 827.13.
The BATS UK 100 was 0.1% higher at 11,881.98, the BATS 250 was flat at 16,285.55 and the BATS Small Companies was up 0.2% at 11,039.37.
Stock markets in mainland Europe were outperforming London, after a strong string of flash purchasing managers' indices for the eurozone and its members.
A survey from IHS Markit showed eurozone private sector expanded at the fastest pace in ten months in October. The composite output index climbed to 53.7 in October from 52.6 in September. It was forecast to increase only marginally to 52.8. Any score above 50 indicates expansion in the sector.
The flash services PMI for the eurozone increased to a nine-month high of 53.5 in October and above the 52.4 expected by economists. The manufacturing PMI rose to a 30-month high of 53.3 in October. It was expected to mirror the 52.6 seen a month earlier.
The strong eurozone performance was largely driven by the German economy. German private sector growth recovered sharply to a three-month high in October, with the flash Germany Composite index rising to 55.1 from a 16-month low of 52.8 in September.
The DAX 30 index in Frankfurt and the CAC 40 in Paris were both up 0.8%.
Ahead of the open on Wall Street, futures pointed the Dow 30 up 0.4%, the S&P 500 up 0.5% and the Nasdaq 100 up 0.6%. In the US corporate calendar, there are earnings from personal-care products maker Kimberly-Clark before the New York open and credit-card provider Visa after the closing bell.
In London, defence and aerospace technology company Cobham was the worst mid-cap performer, down 17%, after it issued its second profit warning of 2016 as the same problems which hampered its performance in the first quarter dragged on.
Cobham had issued a profit warning in April and launched a rights issue of shares at the same time in order to shore up its financial position in the face of deteriorating trading conditions. But rather than abate, the problems continued in the third quarter.
The company said the underperformance has been driven by soft trading in its satellite communications and wireless business units and in the Electronic Solutions arm of its Advanced Electronic Solutions unit. Cobham anticipates an uptick in trading in the fourth quarter but said the softness in the third will mean full-year results miss its previous expectations
Petra Diamonds led the gainers in the mid-cap index, up 5.2%. The diamond miner, which only just rejoined the index last week, said production in the first quarter of its financial year grew by a third year-on-year, and it generated revenue, having not held a diamond sale a year before.
Revenue for the period was USD94.7 million with 745,447 carats sold. The company also completed its second tender following the end of the quarter, making USD66.4 million and selling 574,000 carats of diamonds.
Panmure Gordon analyst Kieron Hodgson said the diamond prices achieved in the company's recent tenders slightly outperformed wider market trends.
In the FTSE 100, easyJet was up 2.9% after being upgraded to Buy from Neutral by UBS. The Swiss bank believes it is "darkest before the dawn" when it comes to the budget airline and said the decline in the company's share price following a slew of profit warnings was overdone.
Fusionex International said it expects its full-year earnings to beat market expectations after a successful second half of its financial year.
The analytics software company said that for its financial year ended September 30, its earnings before interest, taxes, depreciation and amortisation are expected to be "significantly ahead of market expectations". The company anticipates revenue to be in line with market expectations.
Fusionex highlighted the launch of its big data analytics platform GIANT 2016 in June as opening a new market in small and medium sized businesses and said the business pipeline for the platform is "substantial". The stock was up 19%, one of the best performers in the AIM All-Share index.
Still ahead in the economic calendar is the flash Markit manufacturing PMI for the US at 1445 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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