Oil price slump weighs on FTSE 100 as Trump urges against supply cut
Oil prices resumed their decline on Tuesday as Donald Trump urged Saudi Arabia and other major oil exporters not to cut production, weighing on FTSE 100 firms.
A barrel of Brent crude was trading 2.8% lower at 67.06 US dollars.
It came just a day after oil rallied as much as 2.2% after Saudi Arabia signalled a production cut.
But Mr Trump tweeted in opposition to the move, saying that oil prices should be lower based on supply.
Major oil stocks declined on the news, with BP down 14.6p to 513.5p and Royal Dutch Shell “A” shares down 54p to 2,377.5p
The FTSE 100 avoided closing in the red by a whisker, gaining just 0.68 points, or 0.01%, to finish the day at 7,053.76.
The blue-chip index was also under pressure from a swiftly rising pound, which Conor Campbell of Spreadex said “effectively ruined the FTSE’s day”.
Sterling was up 0.77% against the euro to 1.154 and 1.4% against the dollar to 1.303, bolstered by more positive Brexit headlines and fresh labour market figures.
“The best average earnings index reading (excluding bonuses) for a decade primed the pound for a good day this morning,” said Mr Campbell.
“However, it only really let rip after news of ‘optimism on both sides’ over a Brexit deal began to filter through the markets, with Downing Street claiming there are just a ‘small number of outstanding issues’ left to resolve.
“Now it is worth saying, we have been here before. Sterling is so sensitive to any Brexit news at the moment that it doesn’t take a lot for it to bust out some serious movement.”
Vodafone led the FTSE risers as new boss Nick Read took aim at cutting operating costs by at least £1 billion by 2021.
He revealed 900 customer services jobs have been shed amid a drive towards automation, and signalled further cuts ahead.
Shares in Vodafone jumped by 11.24p, or 7.79%, to 155.6p.
Meanwhile, shares in Interserve hit a fresh 30-year low on concerns about the outsourcing company’s financial future.
The stock fell as much as 20% after BBC News reported that an Interserve shareholder doubted the company could survive as it potentially seeks to raise cash to shore up its finances.
But the stock recovered after the company issued a statement saying its strategy was on track, to close 0.82p, or 2.09%, lower at 38.5p.
Elsewhere, European markets were mixed as traders await Italy’s resubmission of its budget to the EU.
David Madden, chief market analyst at CMC Markets, said: “Traders are half-expecting a political fight between the two sides as neither are showing any signs of backing down. The Italian market has swung into positive territory as short covering has set in, but the situation has the potential to trigger another round of the eurozone debt crisis.”
The French Cac was up 0.85% while the German Dax was 1.3% higher.
The biggest risers on the FTSE 100 were Vodafone, up 11.24p to 155.6p, Melrose up 12.2p to 177.1p, Experian up 80.5p to 1,873.5p and Micro Focus up 53p to 1,307p.
The biggest fallers on the FTSE 100 were British American Tobacco down 126p to 2,836.5p, Smurfit Kappa down 74p to 2,240p, BP down 14.6p to 513.5p, and Wood Group down 17.4p to 650.2p.