BP BP Plc

By Carla Mozee, MarketWatch

U.K. construction output below expectations

U.K. stocks sank Tuesday, as oil prices spiraled lower and as BP PLC shares slid by the biggest percentage in nearly six years following dismal earnings.

The FTSE 100 fell 2.3%, to close at 5,922.01, marking its largest daily percentage loss in about two weeks.

"Last week's surge in equities on the Bank of Japan negative rate decision was confounding but is essentially old news this week. It would seem that central bank impact is really beginning to lose its charm and the days of buying the dip on the back of stimulus expectations is no longer the winning strategy it once was," said Brenda Kelly, head analyst at London Capital Group, in a note.

"We're back to the same old story today with materials and energy providing a drag on the FTSE as BP delivered what was frankly a terrible set of results -- its worst loss in 20 years," she said.

Oil pressure: BP shares sank to the bottom of the benchmark, with their 8.7% decline the worst for the stock since June 2010, FactSet data showed. The fall follows the oil major's loss of $2.2 billion in the fourth quarter, (http://www.marketwatch.com/story/bp-reports-steep-fourth-quarter-loss-2016-02-02-24855939) hurt by impairment charges stemming from the long rout in oil prices. Its annual replacement cost loss -- analogous with the net income U.S. oil companies report -- was $5.2 billion, compared with a profit of $8.1 billion in 2014.

Despite the loss, BP kept its quarterly dividend at 10 cents a share.

"BP CEO Bob Dudley will be particularly keen to ensure that the dividend remains untouched having finally restored it in the wake of the Gulf of Mexico disaster," said Michael Hewson, chief markets analyst at CMC Markets, in a note. However, "with average oil prices still trading at multi year lows so far this year the question now needs to be asked in how long can BP sustain the dividend at current levels, without an imminent pick up in oil prices."

Oil prices slid again on Tuesday (http://www.marketwatch.com/story/crude-prices-drop-to-nearly-one-week-low-as-supply-worries-build-2016-02-02) with Brent crude , the global benchmark, down 3.5% at $33.06 a barrel and West Texas Intermediate oil off 4% at $30.36 a barrel. Investors will look for an industry update on weekly U.S. inventories late Tuesday.

Read: How Russia's 'verbal intervention' triggered an oil market rebound (http://www.marketwatch.com/story/how-russias-verbal-intervention-triggered-an-oil-market-rebound-2016-02-02)

Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) shares were down 4.3%, a day after Standard & Poor's said the impact of collapsing oil prices led it to cut Shell's credit rating by one notch on the oil producer. Shares of BG Group PLC (BG.LN), which is being purchased by Shell, fell 3.2%.

Shell will release fourth-quarter results on Thursday.

Movers: BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU)shares stumbled 6.7% after S&P on Monday cut the iron ore miner's credit rating to A from A+ as metals prices continue to drop. S&P warned it could cut the rating again.

Read:FANG stocks? Don't make me BARF (http://www.marketwatch.com/story/fang-stocks-dont-make-me-barf-2016-02-02)

J Sainsbury PLC (SBRY.LN) shares picked up 2.4% after Home Retail Group PLC (HOME.LN) agreed to the supermarket's takeover offer (http://www.marketwatch.com/story/sainsbury-to-buy-home-retail-group-for-19-bln-2016-02-02) of GBP1.32 billion ($1.9 billion). Home Retail runs electronics retailer Argos. Home Retail shares on the midcap FTSE 250 index edged up 0.1%.

Data: The stream of downbeat updates continued with a weaker-than-expected read on the construction industry in January. The sector logged its weakest expansion in nine months, with Markit/CIPS saying its reading of 55.0 was down from 57.8 in December. Analysts polled by FactSet had expected a January reading of 57.5.

The pound dropped to $1.4397 from $1.4433 late Monday.

The pound had earlier found support as the European Union published a draft of potential terms (http://www.marketwatch.com/story/eu-publishes-proposals-on-uk-membership-demands-2016-02-02) related to the U.K.'s membership in the EU. Among the terms, U.K. Prime Minister David Cameron appears to have won a concession on U.K. benefits paid to new migrants.

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(END) Dow Jones Newswires

February 02, 2016 12:21 ET (17:21 GMT)

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