London close: FTSE claws back ground to finish higher

The FTSE 100 closed slightly higher on Wednesday following declines earlier in the session.

The index rose 0.04% to 7,188.82 points.

Earlier on, UK equities were lower as oil prices slumped after data showed a large build in crude inventories.

The American Petroleum Institute revealed late on Tuesday a 14.2m barrel build in its crude oil inventory last week, compared to a 5.8m barrel rise the week before and expectations for a 2.5m build.

The Energy Information Administration on Wednesday said crude inventories rose by 13.8m barrels to 508.6m. Analysts had estimated a build of 2.5m barrels, a fifth consecutive weekly increase.

However, the figures were offset by a surprise drop in gasoline in storage, which helped oil prices stage a recovery. Gasoline stocks fell by 869,000 barrels, compared with analyst expectations for a 1.1 million-barrel gain.

Brent crude rose 0.68% to $55.43 per barrel and West Texas Intermediate increased 0.79% to $52.59 per barrel at 1621 GMT.

Also driving moves in the stockmarket on Wednesday was the move lower in 10-year government bond yields on both sides of the Pond, which boosted interest rate sensitive stocks such as utilities but weighed on banks.

To take note of in that regard, speaking to Bloomberg TV, Steven Major, head of fixed income research at HSBC, argued it was a myth that fiscal loosening drives bond yields higher.

Among corporate stocks, housebuilders continued to rally a day after the government released its housing white paper. The white paper outlined the government’s strategy for solving the housing crisis, including measures to support more affordable homes for the rental market and accelerating construction.

“One of the most striking points we found in the white paper was the government’s view that, in its view, those developers offering more modern methods of construction should be favoured over those that don’t when planning is given/gov’t land is sold off,” HSBC said.

HSBC reiterated its buy rating on the sector and said it believes Persimmon and Berkeley will benefit most from the drive to favour factory built homes while Bellway and Crest Nicholson also offer value.

The sector also benefitted from well-received results from housebuilder Redrow.

On the downside, BHP Billiton was the top faller following reports workers at its Escondida copper mine in Chile vowed to start an indefinite strike on Thursday after the miner failed to produce an agreement following weeks of negotiations. The company said production would stop due to the strike.

Rio Tinto, which has a 30% interest in the Escondida mine, was also on the back foot. Shares were higher earlier in the session after the miner said it swung to a profit in the year to the end of December thanks to a recovery in commodity prices, while announcing a better dividend than expected and a $500m share buyback.

Meanwhile, Bank of England Deputy Governor Jon Cunliffe on Wednesday said UK business investment is likely to remain weak in the near term following June’s Brexit referendum. However, he believes investment will pick up once companies adjust to the changes.

"Ultimately, the outlook for business investment, like the outlook for the economy more generally over the forecast period, depends largely on how households and businesses react to Brexit and on the process that accompanies it," Cunliffe said.

His remarks come after the BoE updated its economic growth forecasts in its quarterly inflation report last Thursday.

There were no major UK data releases on Wednesday.

Market Movers

FTSE 100 (UKX) 7,188.82 0.04%
FTSE 250 (MCX) 18,606.07 0.25%
techMARK (TASX) 3,318.78 0.16%

FTSE 100 - Risers

Capita (CPI) 516.00p 3.66%
Rolls-Royce Holdings (RR.) 722.00p 3.07%
Persimmon (PSN) 2,016.00p 3.01%
Taylor Wimpey (TW.) 176.50p 2.56%
Reckitt Benckiser Group (RB.) 7,287.00p 2.50%
United Utilities Group (UU.) 947.00p 2.27%
Barratt Developments (BDEV) 507.00p 2.16%
Associated British Foods (ABF) 2,500.00p 2.12%
Severn Trent (SVT) 2,323.00p 2.07%
Tesco (TSCO) 197.60p 2.04%

FTSE 100 - Fallers

BHP Billiton (BLT) 1,341.50p -3.38%
Glencore (GLEN) 312.10p -1.81%
Royal Dutch Shell 'B' (RDSB) 2,208.50p -1.80%
London Stock Exchange Group (LSE) 3,084.00p -1.75%
Rio Tinto (RIO) 3,377.50p -1.67%
Hargreaves Lansdown (HL.) 1,364.00p -1.59%
Royal Dutch Shell 'A' (RDSA) 2,121.50p -1.51%
Pearson (PSON) 657.50p -1.42%
Babcock International Group (BAB) 878.00p -1.18%
CRH (CRH) 2,716.00p -1.06%

FTSE 250 - Risers

Ascential (ASCL) 316.30p 5.26%
UDG Healthcare Public Limited Company (UDG) 674.50p 4.74%
FirstGroup (FGP) 116.30p 4.59%
Tate & Lyle (TATE) 720.50p 4.04%
Redrow (RDW) 470.50p 3.98%
Sophos Group (SOPH) 280.20p 3.89%
CLS Holdings (CLI) 1,637.00p 3.48%
BBA Aviation (BBA) 294.90p 3.44%
Assura (AGR) 55.95p 3.13%
Howden Joinery Group (HWDN) 403.80p 3.06%

FTSE 250 - Fallers

Dunelm Group (DNLM) 625.50p -8.62%
Tullow Oil (TLW) 279.30p -5.42%
Petrofac Ltd. (PFC) 872.00p -4.39%
Cairn Energy (CNE) 227.40p -4.17%
Victrex plc (VCT) 1,892.00p -4.11%
Vedanta Resources (VED) 1,051.00p -3.49%
Weir Group (WEIR) 1,965.00p -3.15%
Vesuvius (VSVS) 459.90p -2.71%
Ferrexpo (FXPO) 156.30p -2.62%
Fidessa Group (FDSA) 2,255.00p -2.59%