London close: Stocks close higher as oil prices surge

The FTSE 100 closed higher on Tuesday as oil prices jumped and a speech by Federal Reserve chair Janet Yellen suggested an interest rate hike in June was off the table.

Oil prices continued to rally on supply disruptions in Nigeria and forecasts for falling US crude inventories.

West Texas Intermediate crude was up 0.85% to $50.12 per barrel and Brent was up 1.09% to $51.11 per barrel at 1540 BST.

The Bonny Light crude output in Nigeria has dropped an estimated 170,000 barrels per day (bpd) following attacks on pipeline infrastructure, Reuters reported citing a source.

A report from the American Petroleum Institute at 2130 BST is expected to show US crude inventories fell 3.5 million barrels last week, helping to soothe concerns about the global supply glut.

A weaker dollar also supported the rise in crude prices - as it makes it cheaper for foreign buyers, increasing demand.

Meanwhile, Yellen said the US economy was making progress but kept quiet about the timing of another interest rate increase.

“I continue to think that the federal funds rate will probably need to rise gradually over time to ensure price stability and maximum sustainable employment in the longer run,” Yellen said Monday during a speech in Philadelphia.

Her failure to mention the specific timing on interest rates hikes was seen by economists to signal that a rise was unlikely at the policy meeting next week, particularly after a much worse-than-expected US non-farm payrolls report on Friday.

“After last Friday’s employment report and yesterday’s speech by Yellen we have changed our call for the Fed’s first rate hike this year to September,” said Rabobank.

“The slowdown in the services sector, apparent not only in the employment report, but in the ISM Non-Manufacturing Survey as well, and Yellen’s very cautious tone make a delay to September more likely than July. Our call for two hikes this year remains unchanged, and we still expect the second in December.”

Closer to home, a new Brexit poll from The Telegraph and ORB showed 52% of those in the UK in favour of staying in the EU, compared to 40% who want to leave.

It contrasts with two polls from YouGov and Observer/Opinium on Monday which revealed more people in the Leave camp ahead of the 23 June referendum.

The pound rebounded from Monday’s slide, rising 0.89% against the dollar to $1.4571, following the latest poll.

On the macroeconomic data front, Halifax said UK house prices rose more than expected in May as demand continued to outstrip supply. Prices increased 0.6% in May compared to a month ago, beating analysts’ estimates for a 0.3% gain.

UK retail spending rose in May after two flat months as shoppers stocked up on clothing for the summer, the British Retail Consortium (BRC) said. Spending increased 1.4% in May compared to a year ago, in line with the 12-month average of 1.5%. On a like-for-like basis, excluding changes in the amount of retail space open to shoppers over the past 12 months, the BRC said sales grew 0.5% in May compared with a 0.9% fall in April. Analysts had pencilled in a 0.3% rise in May.

In the eurozone, Eurostat said the economy grew more rapidly in the first quarter than previously estimated. Gross domestic product rose 0.6% in the first quarter than in the final three months of 2015, and was 1.7% higher than the first three months of last year. Eurostat had previously estimated that the economy grew by 0.5% on the quarter, and 1.5% on the year. Analysts had expected no change to the estimates.

Among corporate stocks, retailers Burberry and Next were given a boost by the positive BRC retail figures.

A measure of oil producers, including Royal Dutch Shell and BP, gained on the back of an increase in crude prices.

Shell also said it was increasing the level of cost cuts from its merger with BG Group to $4.5bn from a previously stated $3.5bn.

Sports Direct advanced after boss Mike Ashley appeared before the Commons Business, Innovation and Skills Select Committee to address allegations of the ill-treatment of agency workers.

Anglo American was under the cosh after having its ‘sell’ rating reiterated in a note from UBS. Bloomberg also reported that BHP Billiton and Glencore are among the final bidders for Anglo’s Australian metallurgical coal assets.

Tullet Prebon declined on news that Britain’s competition watchdog is referring its planned purchase of ICAP's global hybrid voice broking and information business for a phase-2 investigation.

Market Movers

FTSE 100 (UKX) 6,279.61 0.10%
FTSE 250 (MCX) 17,180.40 -0.01%
techMARK (TASX) 3,133.17 -0.22%

FTSE 100 - Risers

Royal Dutch Shell 'A' (RDSA) 1,756.00p 3.23%
Royal Dutch Shell 'B' (RDSB) 1,764.50p 3.07%
Burberry Group (BRBY) 1,102.00p 2.13%
Next (NXT) 5,470.00p 2.05%
DCC (DCC) 6,430.00p 1.66%
BP (BP.) 373.25p 1.32%
GKN (GKN) 282.10p 1.29%
Coca-Cola HBC AG (CDI) (CCH) 1,410.00p 1.15%
CRH (CRH) 2,105.00p 1.10%
Centrica (CNA) 206.00p 0.98%

FTSE 100 - Fallers

Anglo American (AAL) 665.50p -3.07%
Glencore (GLEN) 140.00p -2.85%
Antofagasta (ANTO) 440.10p -2.20%
Direct Line Insurance Group (DLG) 369.00p -1.76%
Prudential (PRU) 1,322.00p -1.75%
Smith & Nephew (SN.) 1,170.00p -1.68%
Tesco (TSCO) 156.80p -1.51%
Informa (INF) 674.00p -1.39%
SSE (SSE) 1,529.00p -1.35%
Mediclinic International (MDC) 904.50p -1.20%

FTSE 250 - Risers

Evraz (EVR) 127.30p 10.22%
Sports Direct International (SPD) 383.20p 5.39%
Tullow Oil (TLW) 253.00p 4.63%
Drax Group (DRX) 318.00p 3.62%
Vesuvius (VSVS) 338.90p 3.42%
Entertainment One Limited (ETO) 187.30p 3.20%
Weir Group (WEIR) 1,303.00p 3.00%
Amec Foster Wheeler (AMFW) 456.50p 2.93%
Cobham (COB) 142.10p 2.90%
Cairn Energy (CNE) 197.30p 2.39%

FTSE 250 - Fallers

Allied Minds (ALM) 342.80p -5.17%
Man Group (EMG) 128.50p -4.39%
Jimmy Choo (CHOO) 109.30p -4.12%
Ocado Group (OCDO) 259.20p -3.75%
Tullett Prebon (TLPR) 313.90p -3.47%
Genus (GNS) 1,497.00p -3.42%
Vedanta Resources (VED) 391.60p -3.24%
Euromoney Institutional Investor (ERM) 955.50p -2.90%
Shawbrook Group (SHAW) 269.00p -2.57%
Lookers (LOOK) 138.00p -2.54%