UK energy shares hit 3-1/2-month lowComment on this story
London - Shares in London-listed energy companies fell further and touched their lowest in more than three months on Tuesday following some poor company results and on growing concerns about global demand for raw materials.
The UK oil and gas index fell for a third straight session and dropped as much as 0.8 percent to its lowest since mid-October, with oil major BP falling 1.5 percent after posting a 37 percent drop in fourth quarter profit.
The sector has face some selling pressure on signs of slowing growth in the United States and China, the world's top oil consumers.
Latest data showing US manufacturing activity slowed sharply in January and disappointing factory activity reports from China have prompted investors to trim their exposure to riskier assets like equities.
Weaker energy stocks put pressure on the blue-chip FTSE 100 index, which fell for fifth straight session and was down 0.4 percent at 6,424.86 points by 11:08 SA time after falling to an intra-day low of 6,416.72, the lowest since October.
“I am expecting a further pull-back of at least 3 percent over the next two weeks before we start to find new support and cash. We stay 'market neutral' over the next week of trade but maintain a 'buy-the-dip' mentality,” Mike Jarman, chief market strategist at H2O Markets, said.
The FTSE 100 index has fallen more than 6 percent in two weeks on concerns that a cut in US economic stimulus could result in a flight of capital from emerging markets (EM) and hurt growth in those countries.
“Stock markets always overshoot, especially when it's hard to know where the bottom of the latest EM-derived crisis might be,” Jeremy Batstone-Carr, head of private client research at Charles Stanley, said.
“The Q4 European earnings season has been poor so far, but at least it helps clear the decks for a better 2014.”
In another poor earnings release, British chip designer ARM Holdings fell 4.6 percent, the top FTSE 100 decliner, after missing fourth-quarter expectations for royalty revenue from the use of its processors in smartphones because of slower growth in sales by Apple and Samsung.
However, chartists said the broader market had potential to recover in the near-term.
“Even though the FTSE 100's long-term uptrend has been broken, technicals may provide some downside protection,” Julian McCormack, technical analyst at Brewin Dolphin, said.
“The index is back down to support at around 6,400 and the relative strength indicator is now in 'oversold' territory, suggesting the 6 percent correction is somewhat overdone and downside from here is limited.” - Reuters