Energy market reacts to Tories piece cap pledge, Brent bounces back

Market info
Market info

Electricity and gas suppliers are nursing hefty losses on the London market in response to a Tory Party pledge to cap energy prices if the Conservatives are re-elected to power.

Shares in British Gas-owner Centrica and SSE were down 6.5p to 195.9p and 11p to 1,438p respectively, with Theresa May saying she would save families up to £100 a year by restricting “rip off” energy prices if she wins the General Election on June 8.

Despite the fall, the wider FTSE 100 Index rose 24.8 points to 7,325.5, as mining stocks rebounded after taking a hit in the previous session.

Glencore was up nearly 3%, rising 7.9p to 292.3p, while Antofagasta climbed 17.5p to 771p and Anglo American jumped 20p to 1,029.5p.

Neil Wilson, senior market analyst at ETX Capital, said energy companies would struggle to bolster profits at the same rate if a price cap is enforced.

He said: “The move to cap prices would be a massive hit to the industry. It might cost Centrica something like £200 million and make it much tougher for the firm to reintroduce its progressive dividend policy.

“With a cap it would be very hard for the Big Six to generate the kind of profits they have been able to.

“It does seem that a wave of 10% price hikes this spring was bad timing for companies who maybe thought they had a few more years until a General Election and who didn’t bank on the Conservatives going down this route.”

Across Europe, Germany’s Dax lifted 0.5% and the Cac 40 in France pushed 0.4% higher.

On the currency markets, the pound was marginally ahead against the euro, up 0.1% at 1.186, as investor excitement waned following Emmanuel Macron’s victory in the French presidential election.

Sterling was flat against the US dollar at 1.293.

The price of oil was climbing after slipping back from 49.60 US dollars a barrel in early trading, with concerns over rising US crude output taking the shine off hopes of an extension to Opec-led production cuts.

However, Brent crude was unable to break back through the 50 US dollars a barrel mark, up 0.2% to 49.46 US dollars a barrel.

In UK stocks, software firm Micro Focus International was the biggest faller on the top flight after it said full-year revenues would come in flat or fall by 2% on a pro-forma constant currency basis.

The firm also revealed a lacklustre performance from the software business it is buying from Hewlett Packard Enterprise (HPE), with sales slipping 10% in the quarter to April.

Micro Focus announced in September last year that it would buy the software arm in an 8.8 billion US dollars (£6.6 billion) deal.
Shares in the technology company were off 8%, or 217p, to 2,422p.