Thursday, 29 September 2016

FTSE recovers from one-week low as miners, TUI rally

UK shares rose on Wednesday, recovering from a one-week low as shares in commodities-related stocks rallied and tour operator TUI gained after raising its profit forecast.

The blue chip FTSE 100 index was up 0.9 percent at 6,867.90 points by 0908 GMT, in line with a broader rally in European stock markets.

Mining companies were the top risers, with Rio Tinto, Anglo American and BHP Billiton all gaining between 2.5 to 3.1 percent, with analysts citing a rise in the price of nickel following the suspension of mines in the Philippines as giving the sector a boost.

Oil prices strengthened after industry data showed a surprise draw in U.S. crude stocks, helping shares in UK oil majors BP and Royal Dutch Shell.

TUI also saw strong gains, up 2.4 percent and close to an 8-month high after the holiday company lifted its core profit guidance for 2015/16, helped by strong demand from British tourists and a lower exposure than competitor Thomas Cook to Turkey, which has been hit by security fears.

"The TUI results are quite surprising in a way because we had the opposite story yesterday from Thomas Cook," Jasper Lawler, analyst at CMC Markets, said.

"TUI, fundamentally, are a German company, so they just don't have the pound effect weighing on them in quite the same way that maybe the UK travel firms do," CMC Markets' Lawler said, adding that the drop in pound had made it more expensive for British tourists.

The FTSE 100 fell in the previous two sessions on the back of worries surrounding its banking sector. RBS' $1.1 billion (845.18 million pounds) settlement to resolve claims in the U.S. that it sold mortgage-backed securities to credit unions did not weigh on its shares, which were up 1.4 percent.

"This payment had already largely been provided for and so should not have a material impact on our profit estimates or the group’s capital position," Gary Greenwood, analyst at Shore Capital Markets, said in a note.

British grocer Sainsbury was the top faller on the blue chip index, with a 3 percent fall in its share price pushing it back below its pre-Brexit vote levels after reporting another drop in quarterly underlying sales.

Royal Mail dropped 1.8 percent, after rival UK Mail soared over 43 percent after a deal with Deutsche Post.

Reference: Kit Rees)

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