Shell and BP losses drag London index below European rivals

LONDON’s FTSE 100 was left behind by its European rivals yesterday after it was driven lower by big oil megacaps taking a tumble and recession concerns returning to bite.

The capital’s premier index fell 0.35 per cent to 7,757.37 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, jumped 0.34 per cent to 19,869.34 points.

The FTSE 100’s losses put it at the back of the pile in European trading yesterday.

The pan-European Stoxx 600 dropped 0.20 per cent, while Germany’s Dax was pretty much flat.

France’s CAC 40 jumped around a fifth of a percentage point.

“Stocks across Europe edged higher on Tuesday though the FTSE 100 was left behind,” Neil Wilson, chief market analyst at Finalto, said.

BP and Shell shed around one per cent yesterday and were trading at close to the bottom of the FTSE 100.

The pair represent a big share of the index, meaning movements in their share prices exert an influence on the FTSE 100’s direction.

Sentiment in London was also knocked by weaker than expected data on the health of the UK economy.

The latest purchasing managers’ index (PMI) from S&P Global found the services industry is now shrinking at the fastest rate in two years. The reading fell to 48 from 49.9, far below the 50 point threshold that separates growth and contraction. Manufacturing activity was better than expected.

But European PMIs were better than Britain’s. Germany’s services survey rose above the boom-bust threshold, as did France’s manufacturing data.

Despite predicting a shaky year for the wider advertising field, analysts at Peel Hunt are staying positive on M&C Saatchi with a suggestion of ‘buy (from hold)’. They do shave off predicted revenues by three per cent, to account for flat growth in advertising and CRM stemming from competition, but strong growth in specialism areas is a shiny silver lining. Peel Hunt gave the stock a target price of 247p.

Volatile Behaviour

Marston’s gets a ‘buy’ from Peel Hunt, with sales rising 4.5 per cent compared to the start of 2020 (pre-pandemic), all despite the wider pub sector experiencing zero growth. Factor in the warming weather, falling wholesale energy prices and slowing inflation, and Marston’s is well placed to lead the charge of the sector’s recovery. Peel Hunt gave the stock a target price of 75p.

MICHAEL HEWSON, CMC MARKETS