October 20, 2014 / 2:37 PM / 3 years ago

Britain's FTSE resumes fall, weighed down by oil stocks

* FTSE 100 falls 0.8 pct

* Energy stocks weigh as analysts cut earnings estimates

* Tesco up on media report of bid interest for Asian assets

By Francesco Canepa

LONDON, Oct 20 (Reuters) - Britain’s top equity resumed its fall on Monday, giving back half the gains made in the previous session, as investors reckoned with reduced earnings expectations for oil companies after a slump in oil prices.

At 1419 GMT, the blue-chip FTSE 100 index was down by 49.89 points, or 0.8 percent, at 6,260.40 points, after rising 114 points on Friday.

The FTSE, which hit a 15-month low on Thursday, has been volatile in recent weeks. Investors have been unnerved by weak European economic data just as the U.S. Federal Reserve winds down its equity-friendly asset-purchase programme.

“There was a huge bounce up on Friday, but I don’t think the volatility will go away,” said Hantec Markets analyst Richard Perry.

Energy shares knocked 23 points off the FTSE as lower oil prices led analysts to cut their profit forecasts for a number of companies.

Brent was down 144 cents at $84.72/barrel after falling close to a four-year low at $82.60 last week, hit by weakening demand at a time of ample supply.

Goldman Sachs cut its earnings estimates for the oil services sector by 18 percent to 22 percent, leaving the bank 20-25 percent below consensus.

“Historical correlations between oil prices and European oil service revenues imply there is a 10 percent-20 percent downside potential to revenue from 2014 (estimated) levels on scenarios of Brent oil prices at US$90/80/bl,” Goldman analysts said in a note.

Oil explorer Petrofac fell 2.8 percent as Goldman, Societe Generale and Natixis cut their target prices for the company. Gas major BG Group slid 4 percent. Royal Dutch Shell’s two listings dropped more than 2 percent.


Supermarket chain Tesco, whose shares have slumped some 20 percent over the last month after it said its profits had been overstated, beat the broader market downturn to rise 3 percent, making it the best-performing FTSE stock in percentage terms.

Traders attributed Monday’s gain to a report in The Times that private equity companies were planning to make offers for Tesco’s 9 billion-pound ($14.5 billion) Asian business, and to a Sky News report that Tesco’s accounting black hole would be smaller than originally stated.

“There’s probably a bit of bargain hunting going on with Tesco at these levels, but I still think they’ve got more problems to face down the road,” said Central Markets trading analyst Joe Neighbour.

Small-cap Spirit Pub Company surged 7.4 percent to 97.75 pence after it said its board was in talks with brewer and pub owner Greene King Plc on a revised 109.5 pence-per-share takeover offer. (1 US dollar = 0.6208 British pound) (Additional reporting by Sudip Kar-Gupta; Editing by Larry King)

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