London close: Oilers lift Footsie to month's highest close
London's blue chip benchmark ended at its highest level this month thanks to a strong showing from retailer Next while the surge in oil prices helped BP and Shell but hit easyJet and British Airways owner IAG.
The FTSE 100 ended 49 points or 0.7% higher to 7,507.56, while the FTSE 250 mid-cap index closed down 27 points or 0.1% to 20,461.06. The pound was 0.3% higher against the dollar at 1.3165 and 0.1% firmer versus the euro at 1.1184.
Investors were keeping an eye on developments between the US and China following reports that China’s vice commerce minister Wang Shouwen said at a news conference on Tuesday that said his country was open to trade talks but that Washington had to show sincerity and not put a knife at Beijing's throat. This was read by some traders as a positive and others as a negative.
Canada was back in the spotlight, with US trade representative Robert Lighthizer stating that the US is prepared to push onwards with the NAFTA deal that does not include Canada.
"The inability of Canada to form an agreement with the US acts as a warning sign to the UK, for issues such as the protection of Canadian farm produce is likely to be a similar sticking point for any prospective post-Brexit deal," said analyst Joshua Mahoney at IG.
Prime Minister Theresa May was prepared to meet President Trump on Wednesday at the United Nations General Assembly in New York to discuss trade. In addition, Labour's Brexit spokesman Keir Starmer said earlier that his party would vote against any deal Prime Minister Theresa May agrees with the European Union and is open to a second referendum with the option of staying in the bloc.
Speaking at the assembly on Tuesday, Trump said oil cartel Opec is "ripping off the rest of the world" by pushing up prices, with Brent crude strengthening to a fresh four-year high above $82 a barrel, before retreating later in the afternoon on reports that Saudi Arabia and Kuwait were in talks to restart joint oilfields.
But a Wall Street Journal report that the Saudis are running low on supplies of its most popular crude grade was continuing to rattle the market, traders said, even though Riyadh has denied this.
Crude strength continued to boost BP and Shell to eight-week and six-week highs, along with more gains for Tullow Oil, Premier Oil and Cairn Energy. IG’s chief market analyst Chris Beauchamp said that without the contribution from BP and Shell over the past two days we would be looking at quite a different picture for the UK’s top index.
"Poor OPEC (not a phrase often uttered) continues to get the blame for the ongoing squeeze in prices, but with a declining share of overall global output the president continues to mis-direct his ire. In reality, the cartel’s ability to influence prices remains on a downward trend," he said.
Surpassing the oil majors on the day, Next was the standout gainer, surging 8% as it raised its guidance for annual profit after trading in August and early September was better than expected. Group pre-tax profit will be £727m in 2018, broadly in line with the year before, Next predicted. In May it estimated profit would fall to £717m.
"A relatively low valuation of 12 times forward earnings and strong operating margins, plus the usual positives from the online division, continue to make Next an investor favourite, now that memories of its steep dive from £75 to £35 have receded," said Beauchamp.
Marks & Spencer and Primark owner Associated British Foods were also in the green.
Elsewhere in retail Debenhams made early gains as it launched a new 'store of the future', integrating digital features and putting a greater emphasis on services, such as personal shopping and a beauty club. Shares in the department store group seemed to have found respite at just above 9.5p this week, having fallen from above 50p at the start of last year.
Glencore was a high riser after saying it will buy back more of its shares worth up to $1bn, increasing the size of an existing buyback programme. It also benefited from a broker upgrade.
Imperial Brands ticked up after saying its tobacco business was enjoying "much stronger" second-half sales and announcing plans to launch its heat-not-burn tobacco product early in 2019, while British American Tobacco lost ground as it promoted Jack Bowles, currently chief operating officer of its international business, to the role of chief executive, succeeding Nicandro Durante.
Close Brothers slipped after its final results were in line with expectations, while energy group SSE could not hold onto its early gains from acquiring of Seagreen Wind Energy.
Irn Bru maker AG Barr fizzed lower even as it reported a rise in first-half revenue and profit, while Card Factory retreated it posted a drop in underlying pre-tax profit and like-for-like sales due to extreme weather and consumer caution.
EasyJet and British Airways parent IAG flew lower as oil prices continued to climb.
In broker note action, Glencore was raised to ‘overweight’ at Morgan Stanley, while BHP Billiton was downgraded to ‘equalweight’.
Savills was upgraded to buy at Peel Hunt, but JD Wetherspoon was cut to ‘hold’. Spire Healthcare was resumed at ‘hold’ by Liberum and Auto Trader was cut to ‘equalweight’ at Barclays.
Sky was downgraded to ‘hold’ at Jefferies and Smiths was cut to ‘hold’ at Deutsche Bank.
Market Movers
FTSE 100 (UKX) 7,507.56 0.66%
FTSE 250 (MCX) 20,461.06 -0.13%
techMARK (TASX) 3,495.76 0.18%
FTSE 100 - Risers
Next (NXT) 5,518.00p 7.69%
Randgold Resources Ltd. (RRS) 5,460.00p 4.60%
Just Eat (JE.) 684.20p 4.14%
Glencore (GLEN) 341.50p 3.48%
Intertek Group (ITRK) 4,959.00p 3.40%
ITV (ITV) 156.60p 3.33%
BP (BP.) 586.70p 2.91%
Evraz (EVR) 564.40p 2.73%
Sage Group (SGE) 589.40p 2.50%
Royal Dutch Shell 'B' (RDSB) 2,695.50p 2.41%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 659.40p -3.96%
easyJet (EZJ) 1,335.50p -3.29%
Smurfit Kappa Group (SKG) 3,060.00p -2.30%
Pearson (PSON) 872.00p -1.80%
London Stock Exchange Group (LSE) 4,583.00p -1.72%
National Grid (NG.) 764.70p -1.38%
Lloyds Banking Group (LLOY) 60.90p -1.23%
Smith (DS) (SMDS) 476.70p -1.22%
Royal Mail (RMG) 477.40p -1.18%
Melrose Industries (MRO) 214.10p -1.11%
FTSE 250 - Risers
Thomas Cook Group (TCG) 59.80p 6.79%
On The Beach Group (OTB) 510.00p 6.69%
SIG (SHI) 130.50p 5.24%
Premier Oil (PMO) 135.90p 5.10%
Energean Oil & Gas (ENOG) 581.00p 3.94%
Centamin (DI) (CEY) 109.40p 3.80%
Sophos Group (SOPH) 491.60p 3.67%
Ferrexpo (FXPO) 192.95p 3.57%
Greencore Group (GNC) 183.00p 3.13%
Petrofac Ltd. (PFC) 662.60p 2.79%
FTSE 250 - Fallers
Wizz Air Holdings (WIZZ) 2,837.00p -4.89%
Plus500 Ltd (DI) (PLUS) 1,450.00p -4.79%
AA (AA.) 119.85p -4.04%
TalkTalk Telecom Group (TALK) 127.80p -3.98%
Card Factory (CARD) 179.00p -3.87%
Genus (GNS) 2,360.00p -3.59%
Spire Healthcare Group (SPI) 153.00p -3.59%
Daejan Holdings (DJAN) 5,870.00p -3.29%
Assura (AGR) 54.10p -3.22%
Inchcape (INCH) 667.50p -3.05%