London close: Equities close higher as oil prices rise, BoJ loosens policy

The UK equity market closed higher on Friday as oil prices rose and the Bank of Japan’s latest policy decision was well received.

Oil prices gained on hopes of a deal by major exporters to cut production to address the global supply glut. At 1640 GMT, Brent crude rose 1.4% to $34.38 per barrel and West Texas Intermediate grew 0.39% to $33.35 per barrel.

Crude prices had fallen slightly at one point during the session after a Reuters survey showed OPEC oil production jumped to its highest in recent history in January. Output was lifted by increased sales in Iran following the lifting of sanctions and supply from Saudi Arabia and Iraq.

Russia's Deputy Prime Minister Arkady Dvorkovich said on Friday Russian output could fall as a result of lower investment. However, he said the state would not intervene to balance the market.

Further afield, the Bank of Japan unexpectedly decided to introduce a negative interest rate of -0.1% for new commercial banks' current account deposits. It means the banks will charged by the BoJ for some deposits and hopefully encourage them to use reserves to lend to businesses. The central bank said the rate could be extended further into negative territory in future.

“While this is likely to help undermine the recent appreciation in the Japanese yen, it is highly likely that these actions could prompt similar easier monetary policy from Chinese authorities as they look to offset the deflationary forces at work in their own economy, and is also likely to make that much more difficult for the US Federal Reserve to tighten further in the coming months, and that’s before we even talk about further measures from the ECB, which are expected in March,” according to Michael Hewson, chief market analyst at CMC Markets.

In economic data, GfK’s UK consumer confidence survey showed an unexpected improvement in January. The sentiment index rose to 4 this month from 2 in December, beating estimates of 1.

“UK consumers remain resiliently bullish this month with no sign of the January Blues denting their view on the state of their personal finances for both the past year and also for the rest of 2016,” said Joe Staton, head of market dynamics at GfK.

US gross domestic product growth slowed sharply in the fourth quarter to an annualised rate of 0.7% from 2% in the third, preliminary data from the Commerce Department showed. This was weaker than the 0.8% expected by economists.

“The outlook was pretty bright for the Federal Reserve when it raised interest rates for the first time in nearly a decade in December. It’s most definitely gloomier now,” said Dennis de Jong, managing director at UFX.com.

The University of Michigan’s headline consumer confidence index slipped from 92.6 to 92.0, according to revised data. Analysts had predicted a reading of 93.0.

The Chicago purchasing managers’ index rose to 55.6 in January from 42.9 the previous month. The data, released by the Institute for Supply Management, comfortably beat economists’ expectations for a reading of 45.3 and marked the highest pace of growth in a year. A level above 50 signals expansion in the sector while a figure below that indicates a contraction in activity.

In company news, Old Mutual's shares rallied after South Africa’s central bank raised interest rates for the second time in two months on Thursday. The bank also cut its growth forecast as it tried to offset inflationary pressures by tightening policy.

Imperial Tobacco Group was also up after analysts at Citi added the stock to its Europe Focus list.

BT Group climbed after it said it has completed its £12.5bn acquisition of mobile network operator EE.

Sky gained after reporting strong revenue growth for the first half of the year and announcing that James Murdoch will return as chairman.

AG Barr edged higher after the maker of Irn-Bru said it expected to deliver fourth quarter revenue growth in excess of 2.5%, which would be lapping the 5% growth seen in the corresponding period a year prior.

Tullett Prebon surged after it said market activity in the last two months of 2015 was higher than experienced in the same period a year earlier

Mining stocks were in the red, including Antofagasta, Glencore and BHP Billiton on the combination of the BoJ’s surprise move on interest rates and on tepid data from the US.

Home Retail Group slumped after a report in the Financial Times said that Sainsbury's proposed acquisition of the company had stalled.

Market Movers

FTSE 100 (UKX) 6,059.50 2.15%
FTSE 250 (MCX) 16,466.23 1.67%
techMARK (TASX) 3,166.12 2.21%

FTSE 100 - Risers

Inmarsat (ISAT) 1,096.00p 4.78%
Old Mutual (OML) 168.50p 4.40%
Hargreaves Lansdown (HL.) 1,363.00p 4.28%
Barclays (BARC) 186.00p 4.26%
St James's Place (STJ) 953.00p 4.15%
Aberdeen Asset Management (ADN) 246.50p 4.01%
BT Group (BT.A) 484.85p 4.00%
Unilever (ULVR) 3,085.00p 3.99%
ARM Holdings (ARM) 989.50p 3.78%
CRH (CRH) 1,854.00p 3.75%

FTSE 100 - Fallers

Antofagasta (ANTO) 378.00p -1.56%
Glencore (GLEN) 89.48p -1.07%
BHP Billiton (BLT) 676.40p -0.47%
GKN (GKN) 277.50p -0.29%
Anglo American (AAL) 276.20p 0.11%
Babcock International Group (BAB) 913.00p 0.22%
SABMiller (SAB) 4,182.50p 0.30%
Ashtead Group (AHT) 894.50p 0.51%
BG Group (BG.) 1,051.50p 0.72%
Royal Bank of Scotland Group (RBS) 252.70p 0.80%

FTSE 250 - Risers

NMC Health (NMC) 960.00p 7.44%
Jimmy Choo (CHOO) 139.00p 6.92%
Evraz (EVR) 62.70p 6.54%
Tullett Prebon (TLPR) 335.10p 6.35%
Smith (DS) (SMDS) 364.70p 6.30%
Dairy Crest Group (DCG) 652.00p 6.28%
Rightmove (RMV) 3,983.00p 5.90%
Kier Group (KIE) 1,333.00p 5.71%
Acacia Mining (ACA) 206.20p 5.53%
Laird (LRD) 355.00p 5.22%

FTSE 250 - Fallers

Home Retail Group (HOME) 137.70p -3.37%
Rathbone Brothers (RAT) 2,237.00p -2.53%
Circassia Pharmaceuticals (CIR) 292.60p -2.47%
Pendragon (PDG) 39.61p -2.00%
Indivior (INDV) 151.60p -2.00%
Dunelm Group (DNLM) 874.50p -1.69%
Worldwide Healthcare Trust (WWH) 1,681.00p -1.64%
Entertainment One Limited (ETO) 150.50p -1.63%
OneSavings Bank (OSB) 306.80p -1.51%
CLS Holdings (CLI) 1,616.00p -1.16%