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A fall in oil and technology shares sent leading shares lower again after an early attempt at a rally fizzled out.
With continuing worries about the state of the global economy, crude prices slipped further with Brent down another 1.65% to $84.74 a barrel.
That helped push BG down 40.5p to 1024.5p, Tullow 15.5p lower to 508.5p while Royal Dutch Shell A shares slid 50p to £20.99. Oil services group Petrofac fell 30p to £10.30 as analysts cut their price targets on worries that oil companies could cut their capital expenditure amid the weakness in the crude price.
Meanwhile disappointing results from German software group SAP were followed by a warning from IBM that it could not stick to its 2014 earnings per share forecast. IBM - the world’s largest technology services company - reported an unexpected 4% drop in third quarter revenues after it suffered a “marked slowdown” in September.
It will also pay $1.5bn for chipmaker Globalfoundries to take its semiconductor business off its hands.
IBM shares lost around 7% on the news, helping drag the whole technology sector lower. In the UK chip designer Arm dropped 23.5p to 851.5p, ahead of results from Apple - one of its key customers - due after the market close.
Overall the FTSE 100 finished down 43.22 points or 0.68% at 6267.07. The early positive mood prompted by an overnight revival in Asian markets did not last, with the continuing concerns about a global slowdown and geopolitical problems such as the conflict in the Middle East and the spread of the Ebola virus soon coming back to the forefront of investors’ minds.
The Bank of England’s problems with its real time payment system crashing did not help matters.
And there are some important economic figures out this week, including Chinese GDP, US inflation and eurozone manufacturing data, which could prompt more market volatility.
Among the risers, Associated British Foods added 66p to £26.35 after it signed a deal with US group Sears to lease space for seven standalone stores for its Primark brand, including one in the prestigious King of Prussia mall near Philadelphia. The move is part of Primark’s plan to open 10 stores in the north east of the US in 2016. Credit Suisse issued an outperform rating on ABF, and analyst Charlie Mills said:
Sears refers in its statement to its on-going transformation to “one of the largest real estate portfolios in the US over time”. It is progressively moving from retailer to landlord.
To put this in context Sears has over 2,000 stores in the US and can offer a huge amount of floor space to any would-be tenant. Teaming up with ABF/Primark would seem to open enormous possibilities down the line should Primark’s foray in to the North East prove a success and a springboard into the rest of the US.
This also confirms 2015/16 is lining up to be a bumper year for store openings for Primark, some 500,000 square feet here, on top of a busy European schedule as well.
Tesco added 4.75p to 179.30p on hopes its results on Thursday will be no worse than anticipated after the discovery of a £250m black hole in its accounts, and amid reports of possible disposals to boost its balance sheet rather than a rights issue.
But J Sainsbury fell 2.1p to 242.7p on talk it might be the one to ask shareholders for cash. Analyst Nick Bubb said:
Well, it looks as if Tesco will keep their powder dry on Thursday on the UK turnaround strategy and play down any rights issue plans, so will that tempt Sainsbury to have a rights issue on the back of its interims/strategy update on 12 November?
Elsewhere Russian steelmaker Evraz - part controlled by Chelsea football club owner Roman Abramovich - ended 3.4p lower at 125.3p after JP Morgan Cazenove cut its recommendation from neutral to underweight.
But online gaming group Bwin.party digital added 4.4p to 92.9p after a buy note from Numis in the wake of a trading statement last week. Analyst Ivor Jones said:
bwin.party’s capacity to “pull itself up by its bootstraps” could be just the investment case that investors are looking for in these turbulent markets. After years of frustration and disappointment there is bound to be scepticism, but the third quarter update showed signs of green shoots. Product upgrades are being developed and delivered more quickly, supporting growth where it matters, in sports, and in nationally regulated and/or taxed markets.
We can see the attractions of giving priority to breaking up the group. However, maximising value depends on negotiating from a position of strength and recent management actions may be providing that strength. We believe the shares are priced for a continuation of the status quo. The most recent trading data however, suggests that things are beginning to change.
Lower down the market, President Energy shook off the weak crude price and jumped 13p or 76% to 30p after it made an oil find which will allow it to start producing in Paraguay next year. It said it discovered oil nearly 4,000 metres underground, its first substantial find in the northern Chaco region.
