Receding fears over Eurozone debt levels hand FTSE a boost

BRITAIN’S top share index closed higher yesterday, buoyed by oil stocks after crude reached a two-year peak, while banks fell on fears over Eurozone debt as EU ministers met to discuss ways of preventing debt contagion.

The FTSE 100 ended up 24.96 points, or 0.4 per cent, higher at 5,770.28, for its highest close since 15 November after a choppy session which saw the index dip to 5,728.46.

Integrated oil stocks were the standout gainers after the crude price neared $90 earlier in the session.

Analysts said cold weather in Europe and in parts of the United States should limit the downside for prices because of greater heating oil demand.

But some weakness was seen among risk sensitive banks, with investors rattled after Moody’s Investors Service cut Hungary’s credit rating. Eurozone finance ministers meeting yesterday faced IMF pressure to increase the size of a €750bn (£635.1bn) safety net for debt-stricken members to halt contagion in the single currency bloc.

“The UK market does appear to be outperforming many of the other continental European markets, which perhaps suggests that the UK’s getting a slight boost from not being within the Eurozone,” said Peter Dixon, economist at Commerzbank.

“The European financial ministers’ meeting is not going to be that important, because the real big one (the EU’s heads of government meeting) is on the 16th and 17th December.”

BP led energy stocks higher, adding 3.4 per cent, as investors welcomed further developments on the company’s asset sale aimed at raising cash to pay for its massive oil spill in the Gulf of Mexico. Pakistan’s Oil and Gas Development said it will make a joint bid for BP’s assets in Pakistan with Pakistan Petroleum.

Sentiment surrounding the British oil major was also helped after White House oil spill commission staff said on Friday that BP believes the spill’s actual flow rate may have been as much as 50 per cent below the government’s final estimate.

Miners found favour, following metals prices higher after US Federal Reserve chairman Ben Bernanke said more quantitative easing was possible.

Xstrata was the best sector performer, up 3.4 per cent, following reports that Glencore, which holds a stake of nearly 35 per cent in the miner, is preparing for a £6.3bn London Stock Exchange debut as early as April next year.

But gold miner Randgold Resources, off 2.4 per cent despite a firmer gold price, with traders citing political turmoil in the Ivory Coast.

Upbeat broker sentiment helped Rolls-Royce, up two per cent, with BofA Merrill Lynch lifting its rating on the company to “buy” from “neutral”. Aerospace electronics group Cobham, however, fell 1.9 per cent, as the same broker cut its rating on the stock to “neutral” from “buy”, and after the company agreed to buy US surveillance company RVision for $28m. A UBS downgrade to “neutral” hit Tesco, off 1.6 per cent, ahead of the retailer’s third-quarter sales update today.