BP’s fall takes fuel out of oil stocks but FTSE rises higher

Britain’s top shares closed higher for the third straight session yesterday as miners and banks extended the previous day’s gains but BP dragged energy stocks lower with fourth-quarter results that missed expectations.

The FTSE 100 was up 35.90 points, or 0.7 per cent at 5,283.31, after closing 1.1 per cent higher on Monday.

Miners added the most points to the index as metal prices rose broadly following Monday’s bullish US manufacturing data.

Rio Tinto rose 3.4 per cent after Citigroup upgraded the stock to “buy”, and Anglo American put on 3.2 per cent after SG Securities lifted its rating on the stock to “buy”.

Eurasian Natural Resources, Kazakhmys, Lonmin and Xstrata added 2.9-4.6 per cent.
Banks continued to bounce. Standard Chartered, Barclays, Royal Bank of Scotland and Lloyds Banking Group put on 0.5-3.7 per cent.

Australia’s central bank surprised markets by not raising interest rates for a fourth consecutive time, citing the impact of higher mortgage rates at home while noting tighter policy in China and concerns over sovereign debt abroad.

Drugmaker GlaxoSmithKline rose 1.2 per cent ahead of its fourth-quarter numbers due on Thursday, while peer
AstraZeneca, whose quarterly results were greeted with caution by brokers last week, fell 0.2 per cent.

Travel and leisure firms were also in demand with Whitbread a big gainer, up 2.3 per cent after Goldman Sachs raised its target price.

Thomas Cook and Tui Travel added 3 and 2.1 per cent respectively while British Airways also rose 3 per cent, extending gains from the previous session and ahead of results due on Friday.

Among mid-caps, pub operators found good support after BofA Merrill Lynch reiterated its positive stance on the sector. Marston’s, Enterprise Inns and Punch Taverns firmed 3.4-5.3 per cent.

Energy stocks were the main drag on the index, pushed lower by BP, which fell 3.8 per cent after missing forecasts with a 33 per cent rise in fourth-quarter replacement cost profit and saying an operational turnaround could slow.

“After their stellar third quarter figures many ramped up expectation for the oil giant meaning that anything worse than another huge quarter would result in disappointment,” said Jimmy Yates, head of equities at CMC Markets.

The rest of the sector was higher as the price of crude rose above $75 a barrel.

Royal Dutch Shell, set to report fouth-quarter figures on Thursday, added 1.1 per cent, and BG Group, due to report on Friday, rose 2.2 per cent.

Investors banked profits on utilities, which were big gainers on Monday after mid cap Northumbrian Water rallied on takeover speculation.

Northumbrian, which is yet to comment, shed 2.7 per cent, while blue chip peers Severn Trent and Centrica dropped 1.9 and 0.3 per cent respectively.

On the economic data front, pending sales of previously owned US homes edged up as expected in December, which should help to calm fears of renewed weakness in the troubled housing sector.

The Bank of England interest rate decision is due on Thursday and investors will also await the December US jobs report on Friday. Sterling fell against the dollar and the euro, with investors cautious ahead of the Bank’s decision.