A REBOUND by commodity stocks fuelled strong gains by the UK’s top share index yesterday, as oil prices fell back on hopes for a peace deal in Libya, easing concerns over global demand.
The FTSE 100 was up 90.20 points or 1.5 per cent at 6,005.09 at the close, ending above the 6,000 level for the first time since 21 February. It had fallen in eight of the previous nine trading days.
“The sun has come out today in true ‘risk-on’ style, and after three days of suffering, London’s headline-index is trying to turn positive for the week,’ said Will Hedden, sales trader at IG Index.
Heavyweight energy stocks and miners led the rally, two sectors that have been hit recently by fears the rising cost of oil could derail a fragile global economic recovery and dampen demand for commodities.
Brent crude fell below $115 (£70.64) a barrel as the Libyan government accepted a plan for a negotiated solution to the revolt in the North African country, a spokesman for Libyan ally Venezuelan President Hugo Chavez said.
Oil explorer Tullow Oil was a major gainer, up 3.9 per cent after announcing an oil discovery offshore Ghana.
“While the oil price remains high, we believe the outperformance will continue (for Tullow),” said Richard Curr, head of dealing for CFD specialist Richard Curr.
He said Tullow stock was a “buy”, with a target of 1,500p-plus in the coming weeks, though he recommended “a tight stop loss to take into account any oil-price-driven volatility.”
Xstrata was a strong performer among the miners, up 2.6 per cent after stakeholder Glencore reported bumper profits.
But gold miners African Barrick Gold and Randgold Resources missed out on the sector rally as the price of the precious metal fell, with recent safe-haven-related demand softened by the peace possibilities in Libya.
Gold also fell as the dollar dropped back against the euro after European Central Bank chief Jean-Claude Trichet said the bank would exercise “strong vigilance” over inflation, raising the prospect that it might lift interest rates in Europe as soon as next month.
Travel firms benefited from an easing in worries over fuel costs, with TUI Travel adding 4.6 per cent.
TUI Travel was also boosted as German parent TUI's board gave the go-ahead for a possible initial public offering of container shipping group Hapag-Lloyd, raising hopes for a mop-up bid for the British firm.
International Consolidated Airlines added 3.3 per cent as the recently merged firm reported 8.2 per cent growth in group premium traffic in February.
Strong corporate earnings data in the services and engineering sectors also helped market sentiment.
Engineer IMI topped the risers board, gaining 6.6 per cent to 943p after hiking its 2010 dividend by 29 per cent, while oil services company AMEC closed up 5.4 per cent at 1,190p after it posted a 27 per cent rise in profits for the past year.
Weir Group was also up four per cent at 1,770p.
US blue chips were up 1.4 per cent by London's close, supported by the easier crude price as well as by news US weekly jobless claims dropped to a two-and-a-half year low.
The jobless claims news came one day after a similarly robust ADP report on private sector hiring.
Taken together, the two could bode well for Friday’s key February payroll report.