Oil dominates as global markets close lower

MARKETS closed lower yesterday as headlines about the collapsing price of oil turned heads across the world for the second day running.

The FTSE 100 ended the day down 3%, or 171.8 points, to 5641.03 as it was dragged lower.

However, perhaps surprisingly, it was the mining companies, such as Evraz and Antofagasta that dragged the index lower, while oil majors BP and Shell were largely unaffected. The oil giants are normally highly sensitive to any changes in the price of Brent crude, which plunged by more than a third at one point to $18.82 per barrel. The price later recovered somewhat, and was trading at around $20 by the time markets closed in the UK.

“Given how commodity-heavy the index is, and the fact Brent Crude is down 23%, striking sub-$20 per barrel levels, you’d maybe expect the FTSE to be even lower,” said Connor Campbell, an analyst at Spreadex. He added: “However, BP and Shell crucially managed to keep their losses to 2.3% apiece despite the oil rout. The pound also provided a cushion for the index as it fell... against the dollar and... against the euro following the UK/EU trade negotiations restart.”

It followed stunning scenes in the US on Monday evening. In an unprecedented move, sellers of oil were so desperate to get rid of it they paid buyers up to $40 per barrel to take it off their hands. The negative prices came as whoever was left with an oil contract would be forced to pick up the barrels in Texas, in a time when demand has been flattened and storage sites in the area are all full.

“With mounting worries that the global capacity to store tens of million barrels of extra oil per day is diminishing at an alarming pace, nothing less than a full halt in oil production would give a meaningful sigh of relief to this market,” said Ipek Ozkardeskaya, an analyst at Swissquote Bank.

Germany’s blue-chip index, the Dax, closed down 4%, and Paris-based Cac dropped 3.8%. It cost 1.2279 US dollars to buy £1, a 1.3% drop, and a pound cost 1.1314 euros, a 1.2% fall.

In company news, shares in the insurance group Admiral rose 2.6% after it pledged to hand back £110 million to car and van policyholders as claims plunge amid the coronavirus lockdown. It will pay out £25 for each of the 4.4 million vehicles covered at April 20,

The London Stock Exchange Group dropped by 2.6% after it vowed to complete its £22bn Refinitiv deal by the end of 2020 as it posted surging income thanks to volatility in coronavirus-hit financial markets.

The owner of budget fashion firm Primark, AB Foods, dropped 6.1% as it said 68,000 staff were furloughed across Europe amid the lockdown and it revealed a £248m hit for unsold stock as all its stores stay shut. The FTSE 100 biggest risers were Sainsbury’s, up 6p to 201.5p, Admiral Group, up 58p to 2,253p, Fresnillo, up 17.8p to 720p, Phoenix Group, up 11p to 563.8p, and IAG, up 3.2p to 228.9p.

The biggest fallers were Evraz, down 29.6p to 233.8p, Ashtead, down 163p to 1,675.5p, Antofagasta, down 65.2p to 730.8p, 3I Group, down 56.2p to 716p, and Intermediate Capital Group, down 70p to 923.5p.