London close: Stocks jump on gains in big pharma and rally in oil prices

London stocks advanced on Wednesday as oil prices regained strength and investors awaited the Federal Reserve’s meeting minutes, which were due out later in the day.

Oil prices rose, lifted by a 'bullish' report on the state of weekly US stockpiles of commercial crude.

Hopes that global producers will agree to freeze output at a meeting on 17 April also helped things along. Kuwait, a major player within the Organization of the Petroleum Exporting Countries (OPEC), expressed confidence that members and non-members of the bloc will move ahead with the proposal to curb production.

By the close of the trading session, Brent crude oil futures had climbed 4.87% to $39.81 per barrel and West Texas Intermediate was up 4.9% to $37.74 per barrel.

According to the US Energy Information Administration, inventories of commercial crude oil dropped by 4.9m barrels over the week ending on 1 April.

Three-month copper futures finished the session 0.4% higher at $4,787.50 per metric tonne on the LME.

Gains in the commodity space saw the FTSE 100 end at 6,161.63, up by 70.40 points or 1.16% on the day. The FTSE 250 was up by a more modest 0.84% to 16,866.11.

To take note of, according to Bloomberg FTSE 350 companies were trading at 15.5 forward earnings, 7.0% more than Stoxx Europe 600 index members - the largest premium since 2007. Nevertheless, cable had fallen by nearly 4% year-to-date.

Acting as a backdrop, markets were looking ahead to the minutes of the Federal Reserve’s March policy meeting for more details behind the central bank’s decision to keep interest rates unchanged.

Fed Chair Janet Yellen last Tuesday urged caution on raising interest rates, amid concerns about a potential global economic slowdown and low inflation.

Yellen’s dovish remarks prompted many analysts to rule out a rate hike in April, however more hawkish comments from other policymakers has caused confusion.

“The decision at the last meeting to revise its forecasts for hikes this year from four to two was welcomed by the markets but now seems we’re back in a position where the markets aren’t even convinced we’ll see a single rate hike this year,” said Craig Erlam, senior market analyst at Oanda.

“Such is the conflicting comments coming from the different Fed officials on the economy and the outlook for interest rates that it’s difficult to see where a consensus on a rate hike is going to come from.”

Moves in FX market in focus

To take note of, the US dollar fell below the 110.0 mark against the yen, closing off by 0.57% to 109.71; one senior trader told Digital Look the yen tended to mirror moves in the S&P 500, although quicker rises in real interest rates in Japan relative to the US were also a part of the explanation.

Meanwhile, the pound hit an intra-day low against the euro on Wednesday at 0.81049, according to data from FXCM.

Elsewhere, German industrial production rose 1.3% year-on-year in February, beating expectations for a 0.4% increase, the Economy Ministry revealed.

Closer to home, UK car sales in March reached levels not seen since 1999, with 5.3% growth in the new car market. The Society of Motor Manufacturers and Traders said that almost 519,000 cars were registered last month, though growth in private car registrations slowed.

Big pharma shines bright as US competition authorities begin to act

Shares in pharmaceuticals companies Shire, AstraZeneca and GlaxoSmithKline rallied as analysts at Bank of America-Merrill Lynch said that the termination of Pfizer’s agreement to buy Allergan might turn the London-listed firms into bid targets. A raft of US merger deals were facing increased scrutiny from anti-trust regulators Stateside. Of possible interest, a recent piece from The Economist highlighted how a lack of effective anti-trust regulation in the US might have contributed to record corporate profits, due to the lack of sufficient competition among firms.

In company news, Glencore slumped as it confirmed it has agreed to sell 40% of its agriculture commodities business to the Canada Pension Plan Investment Board (CPPIB) for $2.5bn (£1.8bn) cash, potentially followed by a further sale of 20% more in the long-term.

EasyJet’s shares descended after reporting its load factor decreased in March as hundreds of flights were cancelled due to industrial action. In parallel, a large rally in crude oil futures clipped the wings of rival IAG.

Analysts Elodie Rall, Rajesh Patki, Emily Biddulph and David Min upgraded their recommendation on shares of US-facing CRH from ‘neutral’ to ‘overweight’ and lifted their target price from €26.0 to €29.0.

Cuts to capital expenditure budgets in the Oil&Gas space had only just begun and were beginning to filter through from the ‘Upstream’ segment into Mid and Downstream activities, Morgan Stanley said. For that reason - among others - the team of analysts led by Robert J.Davies downgraded its recommendation on shares of Rotork to ‘underweight’ and cut its target to 155p while cautioning clients that shares in capital goods manufacturers were now more exposed to downside risks.

Tullow Oil gained after saying that it has successfully explored and appraised the Wisting South & Wisting West appraisal well in the Barents Sea, offshore Norway.

Market Movers

FTSE 100 (UKX) 6,161.63 1.16%
FTSE 250 (MCX) 16,866.11 0.84%
techMARK (TASX) 3,143.78 1.50%

FTSE 100 - Risers

Shire Plc (SHP) 4,258.00p 5.16%
AstraZeneca (AZN) 4,127.50p 4.47%
Prudential (PRU) 1,310.50p 3.35%
Next (NXT) 5,410.00p 3.05%
GlaxoSmithKline (GSK) 1,461.50p 3.00%
Marks & Spencer Group (MKS) 420.40p 2.84%
United Utilities Group (UU.) 929.50p 2.54%
CRH (CRH) 1,980.00p 2.06%
Tesco (TSCO) 191.45p 2.03%
Barclays (BARC) 149.40p 2.01%

FTSE 100 - Fallers

easyJet (EZJ) 1,476.00p -3.02%
International Consolidated Airlines Group SA (CDI) (IAG) 535.00p -2.55%
Glencore (GLEN) 140.10p -1.23%
Whitbread (WTB) 3,809.00p -0.94%
Royal Bank of Scotland Group (RBS) 209.00p -0.76%
Capita (CPI) 1,031.00p -0.67%
Anglo American (AAL) 522.50p -0.61%
Inmarsat (ISAT) 983.00p -0.61%
Johnson Matthey (JMAT) 2,672.00p -0.30%
TUI AG Reg Shs (DI) (TUI) 1,045.00p -0.29%

FTSE 250 - Risers

Domino's Pizza Group (DOM) 1,069.00p 5.31%
Jimmy Choo (CHOO) 129.70p 5.02%
AA (AA.) 258.60p 3.49%
Zoopla Property Group (WI) (ZPLA) 260.40p 3.37%
Card Factory (CARD) 354.90p 3.32%
Sophos Group (SOPH) 214.30p 3.08%
Essentra (ESNT) 828.50p 3.05%
B&M European Value Retail S.A. (DI) (BME) 270.00p 3.02%
Moneysupermarket.com Group (MONY) 328.00p 3.02%
TR Property Inv Trust (TRY) 302.00p 3.00%

FTSE 250 - Fallers

Telecom Plus (TEP) 829.50p -6.06%
Rotork (ROR) 165.70p -4.27%
Morgan Advanced Materials (MGAM) 213.20p -1.94%
Vesuvius (VSVS) 313.60p -1.79%
Drax Group (DRX) 281.20p -1.71%
Genus (GNS) 1,520.00p -1.56%
Aldermore Group (ALD) 206.80p -1.48%
Allied Minds (ALM) 425.00p -1.41%
Brewin Dolphin Holdings (BRW) 265.70p -1.41%
Wizz Air Holdings (WIZZ) 1,850.00p -1.33%