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Britain’s top share index slipped to a one-week low on Thursday, with oil major Royal Dutch Shell leading the market down after missing earnings expectations.
Energy shares also came under pressure as oil sank to its lowest point in nearly six years after data showed record stockpiles had built up in the United States.
The UK Oil and Gas index fell 3.3 per cent, while both oil company BP and Weir Group , which makes valves and pumps for the energy and mining industries, fell about 3 per cent.
Royal Dutch Shell dropped 3.4 per cent, the heaviest faller in the blue-chip FTSE 100, after earnings excluding identified items came in below market expectations at $3.3 billion. The company also announced a three-year, $15-billion cut in spending after a slump in oil prices.
Oil has fallen by almost 60 per cent since June because of weak global demand and a boom in US shale production.
John Smith, senior fund manager at Brown Shipley, said the company’s quarterly update disappointed investors due to its high spending and poor refining margins.
“Earnings estimates look far too high. The real impact of the decline in the oil price will be felt on this year’s earnings, and the dividend will remain under pressure if oil prices do not see a significant recovery soon,’’ he said.
The FTSE 100 index was down 0.9 per cent at 6,762.36 points by 0903 GMT after falling to a low of 6,759.11, the lowest in a week.
Sentiment also worsened after the Fed had said on Wednesday that the US economy was expanding “at a solid pace’’ with strong job gains in a signal that it remained on track with its plans to raise interest rates this year.
“Determination to raise rates later this year, expressed in the Fed’s accompanying comments, is setting the market’s tone. Expectations for higher US rates are underwriting a higher dollar, a clear headwind for commodity prices,’’ Keith Bowman, equity analyst at Hargreaves Lansdown, said.
On the positive side, budget airline easyJet rose 2.4 per cent, the top gainer in the FTSE 100 index, after a fall in oil prices and as Barclays raised its stance on the stock to “overweight’’ from “equal weight’’.
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