Concerns over the global slowdown and excess oil supply have pushed the FTSE 100 further into the red with the blue-chip index falling 29 points to 6,743.
The 0.4% decline follows yesterday’s 1.1% fall that was provoked by Asos’ profits warning hitting a beleagured retail sector; although, a rebound in some of their shares helped the mid cap FTSE 250 rally 68 points or 0.4% to 17,486.
Meanwhile, the pound firmed 0.3% to $1.2649 against the dollar on growing hopes of a second EU referendum or a delay to Brexit as the prime minister confirmed her intention to seek parliamentary approval for her postponed withdrawal deal next month.
National Grid (NG) was the biggest FTSE 100 faller, down 6% or 50p to 785p, after energy regulator Ofgem proposed to halve the cost of equity networks can budget for from 2021.
The price controls – part of measures expected to save consumers up to £6.5 billion – knocked other utilities, with Severn Trent (SVT) off 2.5% or 47p to £18.23, and SSE (SSE) down 2.1% or 22.5p to £10.32.
Shire (SHP) shed a further 3.5% or 158p to £43.74 after credit rating agency Moody’s downgraded Japanese drug maker Takeda (4502.T), saying its takeover of Shire would cause its debts to rise six-fold.
But it was oil stocks that dragged the FTSE lower after the price of oil tumbled with US crude dropping $2.04 or 4.1% to a 14-month low of $47.84 a barrel before recovering to $48.56. Brent crude traded $1.35 down at $58.26.
Royal Dutch Shell (RDSb) slid 1.9% or 44p to £22.95 in response, also weighed down by a report that it was in line to buy Texas-based Endeavor Energy Resources for about $8 billion.
Crude prices have slumped more than 30% since early October due to a surge in global oil stocks exacerbated by a dampening in demand as China and other economies lose speed.
Although Opec, the oil producers’ cartel, has agreed to cut production by 1.2 million barrels a day next month, it comes amid rampant supply with Russian output hitting a new record and US shale production expected to exceed more than 8 million barrels per day for the first time.
Next (NXT) led the rebound in retailers recouping 2.7% or 110p to £42.48 after yesterday’s slide.
Fears over the sagging oil price and what it says about the global economy saw the dollar index slip 0.4% against a basket of currencies, even though the Federal Reserve is expected to raise US interest rates for the fourth time this week. That helped the pound to move further away from its 20-month lows against the greenback.
Real estate investment trusts bucked the falling market, with Schroder European Real Estate (SERE) and F&C UK Real Estate (FCRE) recovering from recent weakness, up 2.25% and 2.8% to 113.5p and 89p respectively.
Ecofin Global Utilities and Infrastructure (EGL) also benefited from investors' defensive mindset, up 1.8% to 126.5p.
More growth-oriented trusts gave ground with JPMorgan Chinese (JMC) over 4% or 10p down at 231p; Independent (IIT) 5.3% or 27p down at 477p; Polar Capital Technology (PCT) 1.6% or 18p off at £11.30 and Herald (HRI) 1.8% or 2op lower at £10.65.
Funding Circle SME Income (FCIF) dropped 5% or 4p to 80p after reducing its forecast returns after a difficult half year.