Drax shares tumble after eco-shaming
THE City of London feeds off rumours and yesterday Drax was the name on the tip of every trader’s tongue.
The energy company saw its shares tumble 5.3pc, or 27p, to 483p amid talk in the market that one of the world’s most powerful money managers had blacklisted the stock.
The Blackrock Global Clean Energy ETF is among the top Environmental, Social and Governance (ESG) funds, a bellwether for the climate change conscious investor. In its marketing the fund says it ‘seeks to capture the transformative forces changing societies, driving innovation and redefining business models. Climate change is one such megatrend’.
Up until yesterday Drax had done enough to be a part of the ‘transformation’, moving into biomass – or the burning of wood pellets – instead of coal.
But a report last week saying that its power plant at Selby in North Yorkshire – which uses biomass – is the UK’s biggest carbon dioxide emitter was enough for it be removed. Neither Blackrock nor Drax would confirm the move but traders were adamant the stock had been dropped.
One trader said: ‘Blackrock has obviously been forced to sell on the back of the report. Drax has been eco-shamed.’
The fall in the stock is a set-back for FTSE250 listed Drax whose shares have climbed 263pc over the past 18 months.
Oilers were in focus after Brent Crude moved 2pc higher to trade at $84 per barrel.
Prices were buoyed by a note from Citigroup which thinks Brent Crude could hit $90 a barrel this winter as more and more businesses switch away from gas.
BP was up 1.9pc, or 6.75p, at 360.3p, while Shell climbed 1.5pc, or 25.4p, to 1740p. The metals majors were also on the charge after aluminium jumped to its highest level since July 2008.
Aluminum – which is used in everything from beer cans to iPhones – rose by 3pc to $3,044 a tonne. As a result Glencore was up 3.3pc, or 11.7p, to 367p, Anglo American added 5.2p, or 140p, to 2831p and Rio Tinto gained 3.5pc, or 172p, to 5101p.
Overall the blue chip FTSE 100 was up 0.72pc, or 51.3 points, at 7146.85, But there were some notable fallers, especially the retailers and grocers, amid growing fears about rising inflation.
Analysts believe there is already evidence that consumers have started to curb their spending in the face of increased inflation.
Stuart Cole, head of macroeconomics at Equiti Capital, said the problem that policymakers were facing was that the sources of inflation that had previously seemed temporary were becoming sustainable.
As a result traders are increasingly betting that the Bank of England will raise rates at its December meeting. Ocado was down 3.6pc, or 59p, at 1565.5p, Tesco lost 1.9pc, or 5.25p, to 270.35p and JD Sports was off by 1.5pc, or 15.5p, at 1026p.
Nevertheless the talk of interest rate rises sent banks higher as they always benefit from a higher rate environment.
HSBC added 2.7pc, or 11.25p, at 430.8p, Lloyds was up 2.3pc, or 1.07p, at 47.93p and Natwest gained 2.1pc, or 4.8p, at 231p.
Further down the league table and Britvic, the drinks maker behind Robinsons, Lipton ice tea and Fruit Shoot, slumped after it was downgraded by analysts.
Shares in the FTSE250 (down 0.22pc, or 48.7 points, to 22487.47) company dropped 4.9pc, or 44p, at 859p – their biggest fall in a year – after Royal Bank of Canada said it was poorly positioned, with limited brand power.
The analysts also said Britvic will need to invest heavily in labour, logistics and carbon dioxide supply in the next year. Investors instead turned to rival Fevertree (up 1.6pc, or 38p, at 2471p), which is trying to crack America.