London close: FTSE closes higher as oil prices rally

The FTSE 100 finished higher on Tuesday as oil prices jumped and as investors examined mixed economic data.

Oil prices edged higher amid supply disruptions in Canada and elsewhere that helped alleviate the global crude glut, knocking out 2.5m barrels a day of production.

Brent crude gained 3.08% to $45.02 per barrel and West Texas Intermediate rose 1.8% to $44.28 per barrel at 1622 BST.

“The recent resilience for crude prices has surprised many, with today’s gains coming despite an announcement from Kuwait that they are seeking to raise output by 50% in the next four years,” said Joshua Mahony, market analyst at IG.

“Despite today’s rally, the near three week low set overnight is an indication that perhaps this recent strength may come under pressure once more in the coming weeks.”

In economic data, UK trade deficit on goods and services narrowed to £3.8bn in March from £4.3bn the previous month, beating analysts’ estimates of £4.2bn, the Office for National Statistics said.

The narrowing of the deficit was supported by a £0.4bn increase in exports to £23.7bn, which mainly included unspecified goods, machinery and transport equipment.

However, in the first quarter the total trade deficit for goods and services widened by £1.1bn to £13.3bn compared to the fourth quarter.

"Looking ahead, the slowdown in domestic demand should bear down on imports, helping the trade deficit to narrow further," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"But the outlook for exports remains lacklustre; the real-effective exchange rate is about 5% above its 35-year average despite its recent depreciation, and sterling will rebound if the UK votes to remain in the EU, as we expect."

Meanwhile, the British Retail Consortium said British shoppers held back from buying new spring and summer clothes during an unusually cold April. Like-for-like retail sales fell 0.9% year-on-year in April, compared to a 0.7% fall in March and analysts’ expectations for a 0.5% increase.

Elsewhere, China’s consumer price index rose 2.3% year-on-year in April, unchanged from the previous month and in line with analysts’ estimates. Food prices, particularly pork, were the biggest drivers of inflation.

The producer price index fell 3.4% last month compared to a year ago, easing from March’s 4.3% decline and beating forecasts for a 3.7% drop.

In the US, small business confidence rebounded from a two-year low in April as optimism on the labour market grew, according to the National Federation of Independent Business. The small business optimism index rose 1.0 point to a reading of 93.6 last month, compared to forecasts for 93.1.

US job openings rose in March but hiring declined, according to the Labor Department’s Job Openings and Labor Turnover Survey. Job openings increased 149,000 to a seasonally adjusted 5.8 million in March while hiring dropped 200,000 to 5.3m. The jobs openings rate rose to 3.9% in March from 3.8% in February but the hiring rate slid to 3.7% from 3.8%.

"The latest NFIB and JOLT surveys suggest that, contrary to the already reported slowdown in the pace of monthly payroll gains in April, labour market slack is still shrinking," said Capital Economics.

"That should eventually generate a marked acceleration in wage growth."

Separately, US wholesale inventories rose 0.1% in March from a month ago, in line with analysts’ expectations and following a 0.5% drop in February, the Commerce Department said.

On the corporate front, Capita advanced after it reaffirmed its confidence of achieving 4% organic sales growth in 2016 despite having secured less than half the amount of contracts as at the same time last year.

EasyJet flew higher after reporting a smaller first half loss than expected.

TUI continued to gain after Deutsche Bank expressed confidence that the company would enjoy a strong summer.

Mining stocks reversed earlier losses as the recent plunge in iron ore prices abated. Anglo American, BHP Billiton and Rio Tinto were all sporting gains.

Going the other way, housebuilders were under pressure amid worries about a possible Brexit. The British Chambers of Commerce said its latest survey showed an increase in the percentage of businesses supporting a vote to leave the European Union in the June referendum. Taylor Wimpey, Travis Perkins and Berkeley Group Holdings declined.

Adding to concerns about Brexit, the National Institute of Economic and Social Research said Britain's currency would lose a fifth of its value if the country voted to leave the EU. The think-tank predicted that a vote to leave could see inflation in 2017 be as much as 3.8 percentage points higher than it would be if Britain stayed in the EU. It also expects the economy would be 1% smaller in 2017 and shrink 2.3% by 2018.

Commercial broadcaster ITV was also being punished ahead of results later this week, with investors expecting lacklustre television advertising revenue. HSBC last week forecast advertising revenue growth would be flat.

Market Movers

FTSE 100 (UKX) 6,148.39 0.55%
FTSE 250 (MCX) 16,712.91 0.15%
techMARK (TASX) 3,066.41 0.06%

FTSE 100 - Risers

Capita (CPI) 1,077.00p 5.18%
Anglo American (AAL) 585.80p 4.70%
Standard Chartered (STAN) 495.95p 3.90%
TUI AG Reg Shs (DI) (TUI) 1,068.00p 2.99%
Barclays (BARC) 163.00p 2.87%
Babcock International Group (BAB) 967.00p 2.82%
BHP Billiton (BLT) 815.00p 2.74%
easyJet (EZJ) 1,510.00p 2.72%
Tesco (TSCO) 159.90p 1.98%
Royal Mail (RMG) 505.00p 1.88%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 180.30p -2.01%
Paddy Power Betfair (PPB) 8,910.00p -1.93%
Associated British Foods (ABF) 3,109.00p -1.86%
Berkeley Group Holdings (The) (BKG) 2,940.00p -1.47%
Travis Perkins (TPK) 1,829.00p -1.24%
ITV (ITV) 218.30p -1.04%
Intu Properties (INTU) 296.00p -1.00%
Smith & Nephew (SN.) 1,155.00p -0.86%
Randgold Resources Ltd. (RRS) 5,890.00p -0.84%
Sky (SKY) 940.00p -0.58%

FTSE 250 - Risers

Ocado Group (OCDO) 295.00p 9.26%
Restaurant Group (RTN) 290.60p 6.14%
Lookers (LOOK) 135.20p 3.36%
Vedanta Resources (VED) 370.30p 3.15%
Virgin Money Holdings (UK) (VM.) 333.70p 2.96%
Tullow Oil (TLW) 238.50p 2.80%
JRP Group (JRP) 139.60p 2.65%
Greencore Group (GNC) 376.50p 2.59%
Drax Group (DRX) 316.80p 2.56%
Ophir Energy (OPHR) 66.75p 2.53%

FTSE 250 - Fallers

Allied Minds (ALM) 320.00p -5.02%
Shawbrook Group (SHAW) 265.20p -3.95%
Interserve (IRV) 298.30p -3.84%
Evraz (EVR) 112.30p -3.69%
Centamin (DI) (CEY) 105.80p -3.47%
Capital & Counties Properties (CAPC) 335.00p -3.15%
McCarthy & Stone (MCS) 216.30p -2.96%
P2P Global Investments (P2P) 915.00p -2.61%
Brown (N.) Group (BWNG) 246.50p -2.38%
Circassia Pharmaceuticals (CIR) 265.70p -2.24%