Thursday, 1 December 2016

Rising oil price pulls FTSE higher

Britain's top share index rose on Wednesday, led by rebounding energy stocks as oil prices jumped on hopes of a deal to curb global oversupply, though banking stocks slipped after Royal Bank of Scotland failed a stress test.

The blue-chip FTSE 100 index was up 0.3 percent in morning trading. The index was however set for a fall of 2.5 percent in November, which would snap a five-month winning run.

The index has underperformed European peers this month, as it contains many defensive stocks that have lagged as investors have bet on a return of inflation and growth following the election of Donald Trump as president.

The oil and gas sector is also flat for November, as it has been whipsawed by speculation over Wednesday's meeting of top oil producers in Vienna.

The FTSE's oil and gas index rose 2.8 percent after the price of oil shot up on a comment by an Iraqi delegate that some form of deal would be reached between OPEC members. Comments by the Saudi oil minister helped extend the gains further as he said a deal was close.

Brent crude was last up 5 percent. Analysts say a successful deal by OPEC could send oil towards $60 per barrel, while failure could see oil sink towards $30, which would have a big affect on UK energy stocks.

Royal Dutch Shell gained 3.2 percent, while shares in BP were up 2.5 percent.

Banking stocks were dragged down by Royal Bank of Scotland, which lost around 4.5 percent after it failed a stress test by the Bank of England, meaning it will have to bolster its capital buffer.

Barclays and Standard Chartered were down by between 0.3 and 0.5 percent after failing some parts of the test. Lloyds Banking Group and HSBC, which had adequate capital, were roughly flat.

Despite the drop, the stress test was generally reassuring, said Ipek Ozkardeskaya, an analyst at London Capital Group.

"The results showed greater balance sheet resilience across the UK's banking sector ... This is comforting news for all sectors, which may face uncertain times as the UK prepares to leave the European Union," she said.

Elsewhere, slipping commodities prices saw mining stocks fall, with Rio Tinto, Anglo American and Glencore down by between 2.5 percent and 3 percent.

Shares in Capita fell to its lowest since 2006 after the services provider received two broker downgrades. Its stock was down 4.8 percent, the FTSE's biggest faller.

Several stocks touched record high levels. Equipment rental firm Ashtead was the top performer on the FTSE 100, gaining 3.1 percent and touching an all-time high after RBC raised its target price.

On the mid-cap FTSE 250 index, property listing and price comparison website Zoopla briefly hit its best ever level after it announced strong results and an optimistic forecast, despite fears of a Brexit-related slowdown on the UK housing market. Its shares were last up 6.7 percent.

Packaging company RPC also struck record levels on higher revenues and broker upgrades, and was up 8.6 percent, the top riser on the flat FTSE 250.

Reference: Peter Hobson

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