Unilever and Tullow Oil help drive FTSE briefly over key 6,200 level

BRITAIN’S FTSE 100 share index hit the 6,200 level for the first time since May 2008 yesterday after Unilever got the UK earnings season off to an encouraging start, sending its stock to a record high.

Shares of the Anglo-Dutch consumer goods company rose 3.1 per cent to top 2,500p for the first time ever on strong turnover after Unilever reported underlying sales growth of 6.9 per cent for 2012. It beat forecasts for 6.5 per cent growth, propelled by a double-digit sales expansion in emerging markets.

Shore Capital analyst Darren Shirley reiterated his “buy” rating after the results, saying despite the shares strength they were still worth invesing in.

“Unilever’s investment potential remains in its infancy with ongoing sales outperformance to be driven by the structural advantage of its more than 55 per cent emerging market sales exposure and the systematic implementation of the ‘compass’ which is now embedded within the group’s culture, and with sustained margin expansion to come from the ongoing costs saving programme (+€1bn per annum) and the greater rigour and focus being applied to gross margin expansion across all areas of the business, supported by the materially enhanced IT capability,” he added.

The FTSE 100 saw a late surge that briefly took it above the psychologically significant 6,200 level. It closed up 18.47 points, or 0.3 per cent, at 6,197.64 with Unilever accounting for 3.5 points of the index gain.

The FTSE has now hit a fresh 4-1/2 year high in nine of the past 11 sessions.

“As we are now holding above some key levels on the FTSE 100, namely 6,105 and 6,150, we see continual upside from the market from here,” Atif Latif, director of trading at Guardian Stockbrokers, said.

“Earnings have once again beaten expectations and forward looking estimates remain at elevated levels alongside better economic data. From experience, we do expect this uptrend to remain intact over the short term and break above some recent highs.”

Despite the strength in markets, IG analyst Brenda Kelly cautioned that it was unlikely to continue.

“The jury is out on the effect of another postponement in the US fiscal cliff debacle. With markets looking significantly overbought, it may provide the climate for a market correction,” she said.

Leading the late surge was Tullow Oil. It rose 3.5 per cent, overtaking Unilever as the top index riser, as rumours circulated that drilling at a key well in Kenya which the company part owns may have been successful, with official results due shortly.

Tullow has a 50 per cent share of the Kenyan Paipai prospect, in partnership with UK mid-cap Afren and Canada’s Africa Oil, who hold 20 and 30 per cent stakes respectively. Afren closed 9.2 per cent higher. “The reason [for the price moves] is market rumours that drilling results on the Kenyan Paipai prospect are coming,” a trader said.

Tullow shares were also supported by news that Uganda, where the company has a significant presence, is to auction 13 more blocks for oil and gas exploration. In all, the energy sector including oil and gas firms added 9.3 points to the FTSE 100 index, while the FT350 Oil and Gas firms index hit a three-month high.

In Europe, the FTSEurofirst 300 index of top European shares closed 0.2 per cent higher at 1,167.65 points, just a few points below a peak of 1,170.29 points hit two weeks ago, a level not seen since early 2011. However, the Eurozone’s blue chip Euro STOXX 50 index fell 0.3 per cent to 2,708.28 points, dragged down by a fall in financial shares after lofty gains so far this year.