Utility firms lift FTSE 100 as cold snap drives power sales

UTILITY stocks helped push Britain’s top shares higher yesterday, as the UK’s near-Arctic conditions boosted demand for energy, but British Airways toiled as the big freeze disrupted airline services.

The FTSE 100 closed up 19.86 points, or 0.3 per cent, at 5,891.61.

Meanwhile, the FTSE 250 closed up 6.33 points at 11,433.11.

It touched a fresh intra-day year high of 5,913.83 before falling away, although trade was light as the market wound down for the Christmas holiday at the end of the week.

“If this winter wonderland continues it’s not only good news for Santa, but an early Christmas present for the utility companies too,” said Jimmy Yates, head of equities at CMC Markets.

Utility firms Centrica and National Grid were up 1.4 and 2.0 per cent respectively, as the freezing temperatures boosted demand for electricity and gas.

The Met Office has warned of more snow and ice in many parts of the country.
Oil majors were higher as temperatures in Europe and the US Northeast looked set to remain below freezing this week boosting heating fuel demand.

Oils services firm Petrofac gained 2.5 per cent, while temporary power supplier Aggreko added 2.4 per cent.

The snow and sub-zero temperatures grounded flights across northern Europe yesterday.
British Airways fell 1.9 per cent as the airline cancelled all short-haul flights out of Heathrow.
Mid cap peer EasyJet was off 1.6 per cent.

Retailers, which rely heavily on the foot-fall in the lead up to Christmas, were trampled lower, with Next and Marks & Spencer off 0.9 per cent and 0.7 per cent respectively, and Tesco down 0.8 per cent.

Next was also hit by a downbeat note from H20 Market, which repeated its “sell” rating.

“Our view is that the shares are likely to suffer a continuing downward correction in the run up to the Christmas trading statement on 5 January 2011,” said Daniel Harris, head of dealing at H2O Market.

Mid cap Debenhams was 1.6 per cent lower, while Dixons Retail dropped 6.2 per cent as traders feared the weather would hit sales of its big ticket items, which were expected to pick up ahead of the VAT rise in January.

Back on the upside, Diageo rose 1.4 per cent as investors bet on stocks perceived as better able to endure harsh economic conditions, and as UniCredit lifted its rating on the drinks company to
“buy” from “hold”.

Positive broker sentiment also buoyed InterContinental Hotels, up 1.2 per cent, with Numis Securities upgrading its rating for the stock to “buy” from “add”.