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BP and Shell knock FTSE as oil dips on growth fears

Oil stocks and miners drag FTSE 100 down as China's factory orders warning reignites global growth fears.

BP and Shell knock FTSE as oil dips on growth fears

Energy stocks and miners have dragged down the FTSE 100 as fresh fears over global growth sent oil and metal prices lower.

The UK blue-chip index fell 35 points, or 0.5%, to 6,936, as China warned that falling factory orders could drop further with more possible job losses in coming months. On Monday, China, the world’s second largest economy, reported its lowest annual economic growth since 1990.   

The International Monetary Fund also lowered its global growth forecasts, ahead of the World Economic Forum in Davos, while a survey showed increasing pessimism among business leaders over trade tensions.

Brent crude fell 2% to $61.41 a barrel, sending shares in oil services company Wood Group (WG) to the bottom of the FTSE 100, down 5.3% at 518.4p.

Shell (RDSb) slipped 2% to £23.50, while BP (BP) dropped 1% to 516.7p.  

Miners were also in the red. BHP Group (BHPB) fell 1.8% to £15.81 and Rio Tinto (RIO) dropped 1.5% to £38.70.

Weak results from Switzerland's UBS (UBSG.S) meanwhile weighed on banks.

Royal Bank of Scotland (RBS) was down 1.6% at 238p and Barclays (BARC) fell 1.5% to 162.5p.

Brexit uncertainty also continued to loom over the UK market, after prime minister Theresa May put forward her ‘Plan B’ for the UK’s exit from the European Union on Monday. MPs have since proposed alternative plans to May’s deal. The pound was flat against the dollar at $1.289.

Shares in EasyJet (EZJ) jumped to the top of the index, up 5.7% at £12.28 as the budget airline reported a 14% rise in first quarter revenues to £1.3 billion.

Passenger numbers were up 15% to 21.6 million, despite the recent drone disruption at Gatwick resulting in 400 cancelled flights and a loss of around £15 million.

EasyJet said while demand remained robust it now expected revenue per seat to fall by mid to high single digits in the first half of 2019, with full-year expectations in line with the market. But the airline believed it was well placed to deal with Brexit and was seeing a good level of forward bookings for the period after the deal deadline, on 29 March.

Ian Forrest, investment research analyst at broker The Share Centre, said: ‘While the first quarter performance and future prospects both remain good, the outlook given by the company was not as positive as expected.

‘The market has shrugged that off with the shares rising 2% in early trading today, perhaps due to the understanding these are relatively short term issues.

‘With a good balance sheet and a dividend yield over 5% we continue to view the shares as a buy for medium risk investors seeking a balanced portfolio.’

Among mid-caps stocks Just Eat (JE) rebounded from yesterday's shock news of chief executive Peter Plumb's departure. 

The shares were up 2.3% to 638.4p after the online takeaway business reported it expected revenues for 2018 to beat market expectations.

Macquarie Research analysts were also positive about Just Eat’s ‘concierge’ strategy to personalise service, improve dish delivery and coordination between couriers, restaurants and customers.

‘First, the company has more data on the UK takeaway market than any other competitor,’ an analyst note said. ‘Second, the company’s modern technology platform is able to focus this data to provide a multi-faceted view of each customer.’ 

Just Eat today completed the purchase of Time Out’s stake in fintech company Flyt, which works with major food outlets, enabling customers to split and pay bills on their mobile phones. 

On the FTSE Small Cap index, struggling construction firm Kier Group (KIE) was the big story, after its chief executive Hadyn Mursell stepped down. Shares were up 2% at 534p.

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