THE LONDON REPORT
BRITAIN’S top share index edged higher yesterday as miners and oil stocks buoyed by firmer commodity prices lent support, though with investors nervous before the group of 20 leaders’ meeting at the end of the week.
The FTSE 100 closed 8.24 points, or 0.2 per cent, higher at 5,142.60, after ending Monday’s session 0.7 per cent lower – snapping a six-session winning streak.
“It’s a quieter week on both sides of the pond – and we’ve also got slight nervousness ahead of the G20, so I think markets are marking time a bit,” said Howard Wheeldon, strategist at BGC Partners.
Mining stocks peppered the blue-chip leader board after a bounce in metals prices driven by a weaker dollar.
Eurasian Natural Resources, Fresnillo, Rio Tinto, Lonmin and Randgold Resources rose between 2 per cent and 4.4 per cent.
Energy stocks were in demand as crude rose above $71 a barrel, again supported by the weaker dollar, with Royal Dutch Shell, BP and Cairn Energy adding 0.7 to 1.1 per cent.
Tullow Oil, up 0.4 per cent, was also spurred on by positive comment from Morgan Stanley, which hiked its target price for the stock to 1,500p from 1,225p.
“Tempted to lock in profits on Tullow? We think this would be wrong,” the broker said in a note.
Morgan Stanley argued that the buy case for the oil explorer is more compelling today as energy markets tighten and as it rolls out a drilling campaign the broker thinks could double the share price.
Carnival led the blue-chip gainers, up 5 per cent, after the cruise operator raised its 2009 earnings forecast helped in part by stronger booking volumes.
Ahead of its results, Bank of America-Merrill Lynch had added Carnival to its “Europe 1” list.
The FTSE 100 index has risen 48.6 per cent since hitting a six-year trough in March, but is still down more than 5 per cent from its level prior to the collapse of US bank Lehman Brothers a year ago.
“I’m perfectly content to believe that the worst of the global recession is now behind us; I am far from content to believe that the problems for the UK won’t in a sense worsen before they get better,” said Wheeldon.
Utilities and food retailers were out of favour as investors shunned the defensive issues as their appetite for risk returned.
Severn Trent shed 1.5 per cent as investors fretted over the possibility of a rights issue from the water company.
Evolution Securities downgraded its rating on the stock to “add” from “buy”.
Fellow utilities National Grid and United Utilities dropped 0.8 per cent and 2.2 per cent, respectively.
Among food retailers, supermarket chain Tesco fell 1.6 per cent after the it was reported its retailing services chief executive Andrew Higginson warned of a flat Christmas at best for British retailers.