The North Sea oil price benchmark rose back close to $90 a barrel early Tuesday, lifting the shares of energy majors, after Saudi Arabia denied a newspaper report that it plans to increase production.
The FTSE 100 index, which features Shell and BP, was up 47.42 points, 0.6%, at 7,424.27. The FTSE 250 was down 41.14 points, 0.2%, at 19,372.21, and the AIM All-Share was down 0.93 of a point, 0.1%, at 836.66.
The Cboe UK 100 was up 0.6% at 742.63. The Cboe UK 250 was marginally lower at 16,684.68, but the Cboe Small Companies was up 0.3% at 12,958.60.
UK government borrowing struck £13.5 billion in October as it booked the first costs of the energy support schemes for households.
Chancellor Jeremy Hunt warned there is ‘no easy path to balancing the nation’s books’ after the scale of increased spending was unveiled.
The Office for National Statistics said the reading was £4.4 billion higher than the same month last year and was the fourth highest figure for October on record.
The figure for October was, nevertheless, below the expectations of economists, with a consensus of experts predicting borrowing of £21 billion for the month.
‘The chancellor will be hoping for a glimmer of light at the end of the tunnel in the next year or so and his one big outshot is that interest rates peak at a lower level than anticipated. Right now though, the sunlit uplands of a healthy government balance sheet look a very distant prospect,’ said AJ Bell’s Laith Khalaf.
The pound was quoted at $1.1845 at the London equities open on Tuesday, up from $1.1794 at the equities close on Monday. The euro stood at $1.0262, up from $1.0236. Against the yen, the dollar was trading at JP¥141.82, down from JP¥141.96.
Saudi Arabia on Monday denied a report that oil producers were discussing a production increase for their next meeting, saying a cut approved last month would stay in place until the end of 2023.
The Wall Street Journal reported earlier on Monday that Saudi Arabia, which co-leads the OPEC+ cartel along with Russia, and other members were considering an ‘increase of up to 500,000 barrels a day’.
But the official Saudi Press Agency said on Monday night that energy minister Prince Abdulaziz bin Salman ‘categorically denies’ the report. ‘It is well known, and no secret, that OPEC+ does not discuss any decisions ahead of its meetings,’ SPA quoted Prince Abdulaziz as saying.
Oil prices firmed following the denial, with Brent oil spiking to $88.27 a barrel early Tuesday from $83.07 at the London equities close on Monday. The rising price lifted oil majors in the FTSE 100, with BP up 4.3%, Harbour Energy up 4.8%, and Shell rising 2.8%.
‘The fear of another round of Covid lockdowns, and the broad-based recession pricing shall continue playing against oil bulls. Still, bulls see two positive factors. First, the US will stop selling its strategic petroleum reserves. And second, the EU sanctions against Russian oil will become effective in December. Both, should support another leg higher in oil,’ considered Swissquote Bank’s Ipek Ozkardeskaya.
Meanwhile, broader stock market sentiment was tested by recession concerns as Covid curbs in China escalate.
Anti-virus controls that are confining millions of Chinese families to their homes and closing shops and offices are spurring fears of further damage to already weak global business and trade.
The ruling Communist Party promised on November 11 to reduce disruption from its ‘zero-Covid’ strategy by making controls more flexible, but the latest wave of outbreaks is challenging that, prompting major cities including Beijing to close off populous districts, shut stores and offices and order factories to isolate their workforces from outside contact.
On Tuesday, the government reported that 28,127 cases were found over the past 24 hours in areas throughout China, including 25,902 with no symptoms. New cases in Beijing have also jumped in recent days, more than doubling from 621 on Sunday to Tuesday’s 1,438 - a pandemic record for the city.
In European equities on Tuesday, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was marginally lower.
In China, the Shanghai Composite edged up 0.1%, while the Hang Seng in Hong Kong closed down 1.3%. In Asia on Tuesday, the Japanese Nikkei 225 index closed up 0.6%. The S&P/ASX 200 in Sydney also added 0.6%.
In London, miners made gains early Tuesday, with Glencore up 2.7%, Rio Tinto up 1.8%, and Anglo American up 1.4%.
Gold was quoted at $1,743.51 an ounce, up sharply from $1,733.19.
Gold and silver miner Fresnillo added 1.5% in early trade, as it reported progress in electrifying its Juanicipio project.
The miner said that the additional testing requested by Comision Federal de Electricidad, the Mexican state-owned power company, was successful at Juanicipio.
It confirmed the main substation which will provide power to the project passed inspection, and is now approved for use. The main transformer is now energised, and tests in preparation for the final tie-in to the national grid are progressing in line with requirements from CFE.
Fresnillo is confident of meeting the requirements of the regulator, and of achieving a ‘rapid ramp-up’ of operations once full load commissioning begins at Juanicipio.
Elsewhere in the FTSE 100, building materials firm CRH fell 1.4%.
In the nine months to September, CRH said sales were up 13% year-on-year to $24.4 billion, as positive momentum in the second half continued into the third quarter. This was ‘driven by resilient demand, strong pricing and continued delivery from its integrated solutions strategy’.
CRH expects profit before tax to be ahead of 2021’s $3.1 billion, and earnings before interest, tax, depreciation and amortisation to be around $5.5 billion, compared to $5.0 billion in 2021.
GSK rose 0.8%. The pharmaceutical company said it has begun the process of withdrawing its US marketing authorisation application for its blood cancer drug Blenrep, following a request from the US Food & Drug Administration.
Blenrep, or belantamab mafodotin, is an antibody drug conjugate designed to treat adult patients with relapsed or refractory multiple myeloma.
‘This request was based on the previously announced outcome of the Dreamm-3 phase III confirmatory trial, which did not meet the requirements of the US FDA Accelerated Approval regulations,’ GSK explained.
GSK said it will continue the Dreamm clinical program and work with the FDA ‘on a path forward’ for the treatment.
‘Dreamm-3 failing to meet its primary endpoint and with this now resulting in a withdrawal will likely compound low sentiment for the drug and GSKs capabilities in oncology,’ Shore Capital analysts said.
In the FTSE 250, Babcock rose 2.3%.
It said revenue in the six months that ended September 30 rose to £2.14 billion from a restated figure of £2.13 billion last year. Pretax profit fell to £51.2 million, down from a restated figure of £58.8 million.
The aerospace and defence firm said the profit decline was due to disposals, and non-cash mark-to-market movement on currency derivative contracts, which offset the positive impacts of the NSM acquisition, and the completion of restructuring in the prior period.
Babcock declared no dividend in relation to the period.
‘We expect to see continued operational progress from our focus on execution and growth. We are maintaining our overall financial expectations for the current year,’ Babcock said.
Shore Capital said the interim results from Babcock showed signs of improvement. ‘We are looking for the forecast range in the market to tighten with these results, as the group returns to a normalising operating environment, with visibility, and guidance also strengthens,’ said analyst Robin Speakman.
Shares in online electrical appliance retailer AO World jumped 13%.
AO World guided towards annual adjusted Ebitda at the top end of its £20 million to £30 million range. This comes despite its pretax loss widening to £12 million in the six months that ended September 30 from £4 million a year before.
Revenue fell 17% to £546 million from £661 million.
AO World said its focus on cash and profit has led to ‘solid progress in a tough environment’. It also noted that the cash costs of closing its German business are expected to be ‘around zero’ compared to an original estimate of £15 million.
AO’s shares are still down by over 50% in the past year.
Still to come in the economic calendar, there’s a eurozone consumer confidence reading at 1600 GMT.
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