Sector movers: Oil in the red as Opec output hits two year high
Oil producers and related sectors were in the red due to increased output from Opec, while health care services were in the pink and the telecoms sector rang up gains.
The oil & gas and the oil equipment & services sectors were all lower as crude prices fell to their lowest levels since mid-August on the back of rising US stockpiles and higher output from Libya.
The cost of a barrel of Brent crude dropped 3% to below $73 as Opec oil output was revealed to have risen 430,000 barrels per day to 33.33m a day, the highest since 2016. A Bloomberg survey of officials, analysts and shipping data, revealed Libya pumped a five-year high of 1.22m barrels per day while a record 10.68m a day gushed in Saudi oilfields.
Similar data from Reuters indicated that Opec's higher output was led by the UAE, Saudi and Libya, which more than offset a cut in Iranian shipments due to US sanctions that are set to begin on 4 November.
Moreover, the US Energy Information Administration revealed that oil inventories increased 3.2m barrels last week, more than expected and the sixth weekly climb in a row.
David Madden, market analyst at CMC Markets, also noted that Russian supply is at its highest level since the Soviet Union, while concerns about global growth persist, "and dealers are worried about future demand".
Producers BP, Premier Oil and Tullow Oil all sank lower, along with engineers including Wood Group, Hunting and Petrofac.
Analysts at TD Securities remained bullish on oil, saying the build in inventories was likely due to outsized refinery maintenance in the US, while Iran held strong incentives to boost their sales ahead of the sanctions.
Royal Dutch Shell posted a 40% rise in third-quarter profits to $5.6bn, which was short of the $5.7bn that analysts were expecting. Upstream profits jumped by 235%, and the integrated gas division saw earnings rise by 78%, while earnings at the downstream business dropped 25%.
In telecoms, BT Group's half-year results were the driver for the telecoms sector as the former state monopoly continued to attack costs in order to cope with its stolid top line. Some 2,000 job cuts were made in the half year, as part of the 13,000 targeted as part of the restructuring programme initiated under chief executive Gavin Patterson. The company also said it expects EBITDA to be in the upper half of its £7.3-7.4bn range for the full year.
"The real positive for investors is that, after a tough few years, BT is starting to look more stable. The pension deficit is coming down and investment requirements should flatten out from here. That helps shore up cash flows, and diminishes the likelihood of any further amendments to the dividend plans," said George Salmon, equity analyst at Hargreaves Lansdown.
TalkTalk shares were also carried higher, possibly on news that customer churn at BT broadband jumped from 1.2% to 1.6% under competitive pressure.
The health care equipment & services sector was given a shot in the arm as Spire Health surged 15% higher after a report on the Betaville website that private equity firm Advent International has built up a 3.5% stake in the company.
Quarterly results from Smith & Nephew showed hips and knee strength from the joint replacement specialist, with better margin guidance for the full year. Revenues were up 3% in line with expectations thanks to 4% underlying US growth and as strong China growth was behind 10% growth in emerging markets. Conditions in Germany and the UK "remained challenging".
Top performing sectors so far today
Fixed Line Telecommunications 2,998.24 +7.82%
Leisure Goods 7,981.36 +4.23%
Health Care Equipment & Services 7,063.09 +3.66%
Automobiles & Parts 8,662.25 +3.48%
General Retailers 2,281.58 +2.53%
Bottom performing sectors so far today
Oil & Gas Producers 9,094.46 -2.89%
Oil Equipment, Services & Distribution 13,873.99 -2.74%
Beverages 21,283.10 -1.26%
General Industrials 5,784.61 -1.08%
Pharmaceuticals & Biotechnology 14,555.05 -1.01%