10th Oct 2014 09:49
LONDON (Alliance News) - UK stocks are trading significantly lower Friday as investors exercise increasing caution ahead of the weekend, amid concerns over a slowdown in the eurozone economy and the unchecked spread of the Ebola virus.
Energy stocks are underperforming after the price of oil plunged to its lowest level in almost four years overnight, while travel-related stocks also continue to come under pressure given the Ebola concerns, with the UK government on Friday saying it will start screening for the virus at UK airports.
By mid-morning Friday, the FTSE 100 is down 1.5% at 6,337.89.10, the FTSE 250 is down 1.8% at 14,549.48, and the AIM All-Share is down 1.8% at 709.22.
Major European markets also are lower, with the French CAC 40 down 1.6%, and the German DAX 30 down 2.3%. The German market has now lost more than 10% in little over two weeks amid concerns of a eurozone economic slowdown.
The price of Brent crude oil, which has been on a steady decline since late June despite the geopolitical tensions in both the Middle East and Ukraine, reached a near four-year low of USD88.06 per barrel overnight. Only four months ago Brent traded 25% higher, above USD115 per barrel. West Texas Intermediate crude oil fell to a two-year low overnight, to below USD85 per barrel.
The impact of the oil price fall is being felt in the equities market, with Tullow Oil down 5.7%, Ophir energy down 8.4%, Cairn Energy down 6.1%, Afren down 7.8%, and oil-services company John Wood Group down 4.1%.
John Wood Group was downgraded to Hold from Add as a direct consequence of the oil price drop. Numis says that the lower price environment is likely to lead to reduced capital expenditure by the oil producers, particularly in the onshore US market where Wood Group is active.
Vedanta Resources is a particularly heavy faller, down 8.5% after saying it produced less oil and gas in the first half due to planned maintenance on its operations.
TUI Travel is the worst FTSE 100 performer, down 5.8%, as the travel sector continues to suffer an Ebola-driven sell-off. Tui has now lost 14% of its value this week since news of the first European Ebola case emerged. Cruise ship operator Carnival is also amongst the biggest fallers, down 3.0%, while International Consolidated Airlines is down 2.0%.
Telecom Plus leads the FTSE 250 gainers, up 7.5% after giving a bullish forecast, saying it expects to post first-half adjusted pretax profit and earnings per share "significantly ahead" of the previous year, leaving it comfortable in meeting market expectations for the full year.
Outside of Ebola fears and falling commodity prices, the overriding theme of the week in the markets has been cautiousness in light of disappointing eurozone data and worries that the region may be slipping back into another recession.
Italian industrial production data released Friday will have done nothing to allay those fears, showing a 0.7% fall in production in August, worse than the 0.2% fall that had been expected. French industrial output was flat in August, which was fractionally better that the 0.2% fall that had been expected, but worse than the 0.3% growth recorded in July.
The UK trade deficit narrowed slightly in August, according to data released by the Bank of England Friday. The deficit stood at GBP9.1 billion in the month, down from 10.4 billion in July and beating expectations for a contraction to GBP9.6 billion.
The dollar has regained a little strength since it was sold heavily after the minutes of the September Federal Reserve meeting were released earlier in the week. The pound is lower Friday at USD1.6065, with the euro also down at USD1.2670.
The Fed minutes were taken as more doveish than expected by the market, providing a boost to equities earlier in the week. However, the boost turned out to be very short lived, and analysts have placed more importance on upcoming speeches from individual Fed members, given that, as is always the case, the minutes are a couple of weeks out of date.
On Friday, Philadelphia Fed President Charles Plosser speaks at 1400 BST, with a speech from Fed Reserve board member Daniel Tarullo to come on Saturday.
US futures markets currently point to a lower open on Wall Street, with the DJIA pointing down 0.3%, the S&P 500 pointing down 0.2% and the Nasdaq Composite down 0.6%.
By Jon Darby; [email protected]; @jondarby100
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