Rally in energy stocks helps FTSE to end up – London Report
A late rally in energy stocks on the back of strong crude oil prices yesterday helped to outpace weaker banks – particularly Standard Chartered – and lift the FTSE 100.
The blue-chip FTSE 100 index ended 0.3 per cent higher at 6,383.61 points, helped by a 3.3 per cent jump in the UK Oil and Gas index after oil prices surged following an oil workers’ strike in Brazil, the world’s ninth biggest producer.
Royal Dutch Shell and BG Group rose 1.7 per cent and 2.7 per cent respectively after Shell announced plans for further benefits and cost cuts from its planned $70bn (£45.40bn) takeover of BG.
Brenda Kelly, head analyst at London Capital Group, said that Shell had sought to assure investors that they could make the takeover work, and added: “It seems that investors are taking them at their word for the time being.”
Mid-cap Tullow Oil soared 17.6 per cent after its partner in Ghana, Kosmos Energy, said a new project was on track to be completed next year.
Banks were the biggest sectoral decliners, with the UK banking index falling 0.7 per cent, dragged lower by Standard Chartered.
The Asia-focused bank dropped 6.7 per cent to 666p, the biggest one-day percentage fall in a year, after posting a third-quarter operating loss of $139m, announcing plans to raise billions of dollars in new capital and scrapping its final dividend for this year. “The scrapping of the final dividend payment would in itself have been a setback, let alone the overall quarterly loss against expectations of a profit for the period, but these are eclipsed by the announcement of a rights issue which is an admission of the need for assistance,” said Richard Hunter, head of equities at Hargreaves Lansdown.
James Blanchett, senior trader at H2O Markets, said his company remained “short” on the stock, anticipating it could touch its September low of around 612p. “We have got another four to five per cent downside potential before we unwind our short positions and book profits,” Blanchett said.
Housebuilders also lost ground, with Barratt Developments, Taylor Wimpey and Persimmon down between 2.4 per cent and 5.3 per cent.
That followed a ratings cut from broker Liberum, which said that valuations were too optimistic to withstand future margin pressure.