BP gains while UK economic headwinds subdue the FTSE
A JUMP in the share price of BP on hopes that the Gulf of Mexico oil leak will soon be capped outweighed a weakness in miners to push the FTSE 100 share index higher for a fifth session yesterday.
The index closed up 34.08 points, or 0.7 per cent, at 5,167.02 having last week gained 6.1 per cent – its biggest weekly percentage rise in a year.
But the index is still down 11.3 per cent since April when investor fears about euro zone debt and a double-dip recession began to worry investors and technical analysts cautioned that there was plenty of scope for more weakness.
“The 200-day moving average is at 5,322 and unless we move above that level then there’s still the worry that we are in a corrective phase of an ongoing downtrend,” said Phil Roberts, chief European technical strategist at Barclays.
Volumes are still low, he said, indicating that many people could be waiting for the market to retreat again before returning to equities.
Only around 50 per cent of the last 90 trading days were transacted yesterday.
BP gained 9.4 per cent and added 34 points to the index – its entire gain for the day – after it said it expects to attach a new containment cap on the Macondo wellhead later on Monday that should more than triple the amount of leaking oil being collected.
Elsewhere, Cobham added 2.5 per cent as Bank of America Merrill Lynch upgraded its rating on the stock to a “buy” from “neutral”, with an unchanged 270p price target, in a review of the European Aerospace & Defence sector.
But overall the outlook for the UK economy looked beset by headwinds.
Bank of England policymaker Adam Posen said that Britain was at risk of returning to recession, in part because of looming fiscal austerity and problems in the euro zone, according to an interview published on Monday.
Meanwhile Standard & Poor’s affirmed Britain’s AAA long-term debt rating yesterday but kept a negative outlook, saying that the government’s debt burden may prove inconsistent with the top rating.
Britain’s economy grew at the same pace as previously estimated in the first three months of this year, but the recession that preceded it was deeper than previously thought, the Office for National Statistics said.
Many investors were on the sidelines ahead of the start of the quarterly results reporting season in the United States, which starts with Alcoa after the bell on Monday.
Inflation numbers from the UK, Europe and the United States due for release over the course of the week and a raft of data from China were also expected to attract attention.
Mining stocks were out of favour, falling back after a strong advance in the previous session, after the world’s top metals consumer China reported a drop in copper imports for the third straight month in June.
Kazakhmys, Rio Tinto and Vedanta Resources were the worst off, shedding 1.5 per cent to 2.3 per cent.
Banks, which also advanced on Friday, were mixed. Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered fell 0.6 per cent to 0.9 per cent, while HSBC rose 0.2 per cent.
The energy sector as a whole found support as China revealed a bigger-than-expected trade surplus in June, easing worries about a slowdown in the global economic recovery and oil demand.
Royal Dutch Shell rose 0.4 per cent, while BG Group added 0.1 per cent.