UK stocks notched up gains in early action as investors looked to shrug off a further retreat in oil prices and concerns about the outlook for the upcoming US fourth quarter earnings season.
AT 10.13am, the FTSE 100 was ahead 29.36 points or 0.45% to 6,530.5.
Pharmaceuticals group Shire (LSE: SHP) was in focus on news that it is buying US group NPS Pharma
(Nasdaq: NPSP) for $5.2bn in cash. Shire plans to accelerate the growth of NPS Pharma’s innovative portfolio, focused on gastrointestinal disorders and rare disease patient management.
The deal comes just a couple of months after a £32bn takeover of Shire by US group AbbVie folded.
Oil majors were a drag this morning, with BP (LSE: BP), Shell (LSE: RDSA) and BG Group (LSE: BG) all down just under 1%, as Brent crude fell over 2.5% in early action to $48.81 a barrel.
Concerns about the near-term outlook for oil prices were heightened by Goldman Sachs cutting its average forecast for Brent in 2015 to $50.40 a barrel from $83.75 a barrel. The broker reckons that in three months time, the price will be as low as $42 a barrel.
Overnight news that a big US oil refinery has been hit by explosions and fire, disrupting production, further undermined sentiment over the outlook for oil prices over the short-term.
Amongst the housebuilders, Taylor Wimpey (LSE: TW) assured investors in a trading update that its order book stands at record levels and that it has kicked off its new year in an “excellent position”. The firm says it is benefiting from a “more sustainable housing market”.
Investors are nervously eyeing the start of the US fourth quarter earnings season today with aluminium group Alcoa (NYSE: AA) slated to enlighten after close on Wall Street. Corporates on the fourth quarter runway for later this week include Goldman Sachs (NYSE: GS), JPMorgan Chase & Co (NYSE: JPM) and Wells Fargo (NYSE: WFC).
The Wall Street Journal reckons the reporting season will test investor nerves as it is likely to reveal the softest US profit growth in years, thanks to the collapse in oil prices and a strong dollar.
That “double whammy”, together with the highest valuations for US stocks since the financial crisis, will test the market’s ability to prolong its extended bull run, ensuring more bumpy trading in the weeks ahead.
Elsewhere, The Daily Telegraph reports that North Sea oil and gas firms are to be offered tax breaks by Chancellor George Osborne to avoid a drastic reduction in their investment programmes due to the dramatic fall in oil prices.
The Guardian, meanwhile, cites Jeremy Leggett, an award-winning scientist and former oil and gas industry adviser, as saying that the oil price crash coupled with growing concerns about global warming will encourage at least one of the major oil companies to turn its back on fossil fuels in the near future.