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FTSE preview: Oil woe back to knock shares

By Reuters
Updated: 03:02 EDT, 2 March 2011

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The FTSE 100 index is seen dropping on Wednesday, extending Tuesday's late slide in tandem with hefty sell-offs on Wall Street and in Asia as the oil price jumped on concerns escalating tensions in Libya would spread in the Middle East, hitting supply.

Dealers monitor their screens on the trading floor of IG Index in London

Oil fear: Brent crude rose towards a 2-and-a-half-year high on Wednesday.

The UK blue chip index is seen opening down 53 to 64 points, or as much as 1.1% on Wednesday, according to financial bookmakers, having closed 58.25 points, or 1.0% lower on Tuesday at 5,935.76.

Brent crude rose towards a 2-and-a-half year high above $116 a barrel on Wednesday, having gained around 15% in less than two weeks, fanning worries about the impact of high oil prices on the global economic recovery.

US Federal Reserve Chairman Ben Bernanke said on Tuesday that the recent surge in oil was unlikely to derail the economy, but his comments did little to reassure investors worried that turmoil in the Middle East could hit Saudi Arabia, the world's largest oil exporter.

US blue chips dropped 1.4% on Tuesday, while the broader S&P 500 index shed 1.6%.

Shares in most Asian markets fell on Wednesday, echoing Wall Street's slide, as the CBOE Volatility Index VIX, the so-called fear gauge, jumped sharply. Tokyo led the losers with stocks falling more than 2% on futures-led selling.

On the macroeconomic front, the only domestic data of interest, scheduled for release on Wednesday, will be February's Markit/CIPS construction PMI report, due at 0930 GMT, with a reading of 52.9 forecast, down from 53.7 in January.

With investors also focused on Friday's US February nonfarm payrolls report, the latest Challenger Layoffs and the February ADP National Employment survey will give a snapshot of the picture for jobs across the Atlantic.

After the London close, the Federal Reserve Beige Book will be released at 1900 GMT.

Ex-dividend factors will knock 4.57 points off the FTSE 100 index on Wednesday, with Rio Tinto, RSA Insurance, and Diageo all losing their payout attractions.

Standard Chartered's earnings met expectations as it reported a 52% rise in second-half net profit amid strong growth in emerging markets.

TNK-BP has offered to buy a 5% stake in BP for £5bn in an attempt to resolve a dispute over BP's proposed deal with Rosneft, the Times said on Wednesday.

India's Tata Steel, the world's No. 7 steelmaker, has raised its stake in Africa-focused coal miner Riversdale to 27.14%, Riversdale said on Wednesday. Rio Tinto last month extended its $3.9bn takeover offer for Riversdale Mining after Tata Steel said it had yet to decide whether to hold or sell its stake.

WM Morrison is set to announce a £1bn share buyback with its annual results next week, the Financial Times said, citing sources familiar with the matter.

Rupert Murdoch's News Corporation is close to finalising a remedy with Ofcom and the Office of Fair Trading over a proposed bid for broadcaster BSkyB, which could see Sky News hived off into an independent trust, The Daily Telegraph said.

There will be results today from International Power, Serco Group, Whitbread, Admiral and Amlin.

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