London close: Stocks manage gains as oil prices rise

London's financial markets finished with a positive performance on Tuesday, driven by encouraging data from the UK construction sector and BP's share buyback expansion.

The FTSE 100 closed with a gain of 0.9%, reaching 7,681.01 points, while the FTSE 250 also posted a positive day, rising 0.8% to reach 19,171.34 points.

In currency markets, sterling was last up 0.47% on the dollar to trade at $1.2595, while it strengthened 0.39% against the euro, last changing hands at €1.1714.

“European stock indices followed in the footsteps of their Chinese counterparts which strongly rallied on policy support hopes,” said IG senior market analyst Axel Rudolph.

“Disappointing eurozone retail sales - which fell the most in a year - dampened the European session in morning trading but better-than-expected BP fourth quarter earnings, declining euro area inflation expectations and an unexpected surge in German factory orders provoked end of day gains, led by the FTSE 100.

“US indices, however, saw a mixed start to the session while trading close to their recent record highs.”

Rudolph added that oil prices, which declined amid demand concerns and ample supply over the last four trading days, recovered by around half a percentage point as tensions remained high in the Middle East.

“The Reserve Bank of Australia’s decision to keep its rates on hold whilst talking about the possibility for further rate hikes in order to tame inflation led to a minor Australian dollar appreciation and a pause in the greenback's strong appreciation over the past couple of days.

“This helped the gold price regain recently lost ground.”

Construction sector shows signs of optimism

In economic news, the UK construction sector, while remaining in contraction territory in January, displayed signs of optimism, reaching a two-year high.

The S&P Global/CIPS construction purchasing managers’ index climbed from 46.8 in December to 48.8, surpassing consensus expectations of 47.3.

That marked the highest reading since August last year, but still remained below the pivotal 50.0 mark that distinguishes contraction from expansion for the fifth consecutive month.

Within the construction sector, civil engineering emerged as the best-performing segment in January, with output levels approaching stabilisation.

Commercial activity also demonstrated resilience, showing only a marginal rate of decline.

However, the housebuilding sector continued to experience a sharp decline at the outset of 2024, attributed to subdued demand conditions and a shortage of projects to replace completed ones.

Despite subdued order books, the survey revealed a substantial upswing in business activity expectations.

About 51% of respondents anticipated a rise in business activity in the year ahead, with only 12% expecting a decline.

That marked the highest level of business optimism since January 2022.

Lower borrowing costs and increased consumer confidence are anticipated to boost construction activity throughout the year.

“UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon,” said Tim Moore, economics director at S&P Global Market Intelligence.

“The prospect of looser financial conditions and an improving economic backdrop meant that business activity expectations strengthened to the highest for two years in January.

“Moreover, there were again signs that customer demand is close to turning a corner as total new orders fell to the smallest extent for six months.”

Turning to retail sales, the annual rate of growth slowed to its lowest level in 17 months in the UK in January.

Despite a reduction in inflationary pressures, non-food sales declined, causing total retail sales to increase by a modest 1.2% compared to January last year.

The figure represented a slowdown from the 1.7% year-on-year growth seen in December and the 2.7% annual increase in November.

The last time year-on-year growth dipped below such a level was in August 2022, when it stood at just 1.0%.

“Easing inflation and weak consumer demand led retail sales growth to slow,” said the BRC's chief executive Helen Dickinson.

“While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month.

“Larger purchases, such as furniture, household appliances, and electricals, remained weak as the higher cost of living continued into its third year.”

On the continent, German factory orders unexpectedly rose in December, according to data from Destatis.

Orders surged by 8.9% on a seasonally and calendar-adjusted basis, following a flat reading in November and defying expectations for no change.

On a year-on-year basis, factory orders increased by 2.7% in December, rebounding from a 4.7% decline the previous month.

However, for the entirety of 2023, incoming orders decreased by 5.9% on a calendar-adjusted basis compared to the previous year.

Notably, the construction of various vehicles, including aircraft, ships, and trains, recorded growth during this period.

BP jumps on buyback announcement, Entain slips

On London’s equity markets, energy giant BP jumped 5.62% on the back of its announcement of a $1.75bn share buyback, despite experiencing a decrease in annual profits due to falling oil prices in 2023 following Russia's invasion of Ukraine.

BP's full-year underlying replacement cost profit was halved to $13.8bn from $27.6bn in the previous year.

Looking ahead, BP anticipated higher reported upstream production in the first quarter of 2024 compared to the final three months of 2023.

“A big plunge in BP’s profit year-on-year is not really big news,” said Russ Mould, investment director at AJ Bell.

“Volatile oil prices will inevitably feed through to the company’s bottom line.

“It is also worth remembering that last year’s profit represented a record level.”

Prudential added 3.84% after Barclays raised its price target for the overweight-rated shares to 1,640p from 1,610p.

Renishaw surged 16.01% after it reported higher costs, pay inflation, and currency fluctuations impacting margins in its first half, resulting in a 23% decline in adjusted profits amid challenging market conditions.

However, Renishaw expressed optimism about the second half of the year, suggesting a potential turnaround.

Banking group Virgin Money UK rose 2.1% after reporting a first-quarter performance in line with guidance.

The company noted growth in new accounts, deposits, and target lending activities at stable margins.

On the downside, Ladbrokes owner Entain slid 2.47% following a downgrade from Barclays, which shifted its rating from 'overweight' to 'equalweight.'

Barclays said that while Entain's stock appears inexpensive, the risk/reward balance is relatively even.

Aston Martin Lagonda's shares dipped 3.86% amid reports that the company was seeking candidates to succeed Amedeo Felisa as chief executive officer, potentially making it the fourth CEO in as many years for the UK carmaker.

Bloomberg reported that executive chairman Lawrence Stroll has reached out to current and former heads of other luxury auto manufacturers to gauge their interest in the role.

Discoverie Group faced a minor decline of 0.52% despite reporting that its full-year performance remains on track.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,681.01 0.90%
FTSE 250 (MCX) 19,171.34 0.80%
techMARK (TASX) 4,427.54 1.45%

FTSE 100 - Risers

BP (BP.) 478.95p 5.46%
Weir Group (WEIR) 1,832.50p 4.15%
Prudential (PRU) 849.20p 3.84%
JD Sports Fashion (JD.) 110.75p 3.46%
Kingfisher (KGF) 218.00p 3.43%
Rolls-Royce Holdings (RR.) 317.80p 2.58%
Antofagasta (ANTO) 1,764.50p 2.56%
Ashtead Group (AHT) 5,240.00p 2.50%
BAE Systems (BA.) 1,205.50p 2.25%
Hikma Pharmaceuticals (HIK) 1,920.50p 2.07%

FTSE 100 - Fallers

Pearson (PSON) 939.60p -2.99%
BT Group (BT.A) 107.05p -2.50%
Entain (ENT) 965.80p -2.40%
Coca-Cola HBC AG (CDI) (CCH) 2,290.00p -1.51%
3i Group (III) 2,316.00p -1.07%
National Grid (NG.) 1,036.50p -1.00%
Severn Trent (SVT) 2,536.00p -0.70%
British American Tobacco (BATS) 2,362.00p -0.67%
GSK (GSK) 1,653.00p -0.58%
SSE (SSE) 1,669.50p -0.57%

FTSE 250 - Risers

Renishaw (RSW) 3,986.00p 16.01%
Energean (ENOG) 970.00p 5.09%
Spirent Communications (SPT) 118.00p 4.33%
Trustpilot Group (TRST) 184.70p 3.74%
TUI AG Reg Shs (DI) (TUI) 541.50p 3.43%
Watches of Switzerland Group (WOSG) 382.40p 3.24%
Target Healthcare Reit Ltd (THRL) 84.10p 3.19%
Me Group International (MEGP) 129.60p 2.86%
PureTech Health (PRTC) 195.20p 2.85%
Computacenter (CCC) 2,906.00p 2.83%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 176.60p -3.86%
Hochschild Mining (HOC) 98.05p -2.92%
IP Group (IPO) 50.70p -2.88%
Baltic Classifieds Group (BCG) 240.00p -2.48%
Genus (GNS) 2,142.00p -2.28%
Ferrexpo (FXPO) 86.35p -2.26%
Tyman (TYMN) 288.50p -2.21%
Drax Group (DRX) 467.10p -1.77%
HGCapital Trust (HGT) 426.50p -1.73%
Octopus Renewables Infrastructure Trust (ORIT) 80.40p -1.71%