FTSE 100 Endures First Annual Fall Since 2011 Amid Oil Rout and Sector Malaise

The British FTSE 100 index, dominated by commodity shares, suffered its first annual fall since 2011 in 2014, ending the year down 2.7pc to 6,566.09. The decline was largely attributed to the significant drop in oil prices, which saw Brent crude plummet from $115 a barrel in June to less than $56 in December, affecting oil and gas stocks, including Tullow Oil and BG Group, which tumbled 51.6pc and 33.3pc respectively. The grocery sector also experienced weakness, with Tesco and J Sainsbury falling 43.5pc and 32.4pc, respectively, on concerns over profit warnings and the rise of discount retailers Aldi and Lidl.

Key Takeaways:

• The FTSE 100 index suffered its first annual fall since 2011, ending the year down 2.7pc to 6,566.09.
• Oil and gas stocks were severely affected by the decline in oil prices, with Tullow Oil and BG Group losing 51.6pc and 33.3pc, respectively.
• The grocery sector experienced weakness, with Tesco and J Sainsbury falling 43.5pc and 32.4pc, respectively, due to concerns over profit warnings and the rise of discount retailers Aldi and Lidl.
• The FTSE 250 mid-cap index, however, rallied to end the year 0.9pc ahead, boosted by the property market boom and low interest rate environment.
• Shares in property developers, such as Persimmon and Barratt Developments, rose 27.4pc and 35pc, respectively, on the back of the reform of the stamp duty regime and the low interest rate environment.
• Investors expect biomedical and pharmaceutical companies to benefit from increased M&A activity, with Astra-Zeneca and Shire rising 27.4pc and 58.9pc, respectively.
• Retailers, such as easyJet and British Airways owner International Airlines Group, are expected to perform well due to lower fuel costs.

Statistics:

• The FTSE 100 index fell 2.7pc to 6,566.09 in 2014.
• Oil and gas stocks suffered significant losses, with Tullow Oil and BG Group declining 51.6pc and 33.3pc, respectively.
• The grocery sector experienced weakness, with Tesco and J Sainsbury falling 43.5pc and 32.4pc, respectively.
• The FTSE 250 mid-cap index rallied 0.9pc to end the year at 16,085.44.
• Shares in property developers, such as Persimmon and Barratt Developments, rose 27.4pc and 35pc, respectively.
• Retailers, such as easyJet and British Airways owner International Airlines Group, are expected to perform well due to lower fuel costs.

Sources:

• Gerard Lane, Shore Capital: "Ironically, the longer the oil price stays down, the better the global economy can perform"
• Jeremy Batstone-Carr, Charles Stanley: "Nobody has the faintest idea what the outcome of the general election is going to be"
• Robert Parkes, HSBC: "The election is more likely to affect the mid-cap FTSE 250, which has greater exposure to the domestic economy"
• Bloomberg: "$115 a barrel in June to less than $56 in December"
• The Sunday Times: "Tullow stock tumbled 51.6pc to 413.9p"
• The Sunday Times: "Tesco, plagued by a series of profit warnings, plunged 43.5pc to 189p"