U.K. stocks closed lower Monday as energy shares struggled, offsetting Royal Mail PLC’s strong performance.
“The fact that Friday’s rally barely lasted minutes into the new week illustrates that we are still stuck in the holding pattern that has dominated over the past two weeks,” said Chris Beauchamp, senior market analyst at IG, in a note.
Royal Dutch Shell PLC /zigman2/quotes/204253697/delayed UK:RDSB +3.21% /zigman2/quotes/207682964/composite RDS.B +4.29% dropped 1.3%, and rival oil producer BP PLC /zigman2/quotes/207305210/composite BP +4.26% declined 1.1% as oil prices fell. Brent crude fell more than 1% to trade near $48 a barrel and West Texas Intermediate /zigman2/quotes/209725316/delayed CLN26 0.00% lost more than 1% to trade under $48 a barrel.
Some oil production was set to start again after shutdowns related to wildfires in the Canadian oil-sands region. Oil prices had gained in recent sessions on global supply disruptions.
Other commodity shares declined Monday, with platinum producer Anglo American PLC /zigman2/quotes/201381512/delayed UK:AAL +2.32% down 0.3%. Iron-ore heavyweight BHP Billiton PLC /zigman2/quotes/208108397/composite BHP +2.39% /zigman2/quotes/201448516/delayed AU:BHP +0.61% shares were down 0.8%.
Inmersat PLC shares fell 4% after Morgan Stanley downgraded the satellite company to equal weight from overweight.
But Royal Mail PLC /zigman2/quotes/204213037/delayed UK:RMG -0.24% rose 4.3%, spurred by a ratings upgrade for the delivery company to sector perform from underperform at RBC.
“This summer/autumn should see greater certainty emerge of the direction of future wage inflation, cash pension costs, and more detail start to emerge from [regulator] Ofcom,” RBC said.
Other movers: Shares of easyJet PLC /zigman2/quotes/202825892/delayed UK:EZJ +1.26% closed up 1.9% and British Airways parent IAG PLC /zigman2/quotes/208070069/delayed UK:IAG -0.26% gained 1.2%, with investors taking in stride an outlook of slowing profit by rival airline Ryanair Holdings PLC /zigman2/quotes/204532167/delayed DE:RY4C +5.65% . Ryanair said terrorism could hurt falling airfares even more.
Tobacco shares eventually pulled lower after French insurer AXA /zigman2/quotes/202169431/delayed FR:CS +0.73% said it’ll stop investing in the industry, citing economic costs. British American Tobacco PLC /zigman2/quotes/209116881/delayed UK:BATS +0.24% fell 0.8%, while Imperial Brands PLC /zigman2/quotes/208789104/delayed UK:IMB +1.24% turned down to trade 1.1% lower.
Sterling: The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0967% was dragged lower, buying $1.4454 compared with $1.4500 late Friday in New York, after the U.K. Treasury warned the economy could enter a recession if the country votes to cut membership ties with the European Union. A June 23 in/out referendum that results in support of a so-called Brexit could bring “an immediate and profound economic shock,” the Treasury said in a report.
Treasury chief George Osborne followed the report with a series of Brexit warnings on Twitter.
“Anybody who’s followed the Treasury’s forecasts will know there is a wide margin for error but the doom-laden headlines will be one more reason to spook the public out of voting to leave,” said Jasper Lawler, market analyst at CMC Markets, in a note.