London midday: Oil stocks rebound as markets rise on stimulus hopes

The potential positive impact on consumer spending from depressed oil prices and hopes over stimulus in Europe and China gave UK stocks a big lift on Tuesday, with markets bouncing sharply off their lowest levels in more than two weeks.

The FTSE 100 was trading over 1% higher at 6,725 by midday, erasing a 1% loss on Monday which sent the index to 6,656.37, its lowest since 14 November.

Weak manufacturing figures from China and the Eurozone prompted stocks to fall the previous session, as markets continued to react to the recent plunge in crude prices.

However, West Texas Intermediate oil jumped 4.3% to $69 a barrel on Monday, its biggest one-day jump since August 2012, rallying after falling to its lowest in over four and a half years last week following OPEC's decision not to cut output.

International Monetary Fund managing director Christine Lagarde has said that lower oil prices should help boost global growth as they give consumers impetus to spend more. While there will be obvious risks for oil-exporting nations like Russia, she said: "On a net-net basis, it is probably good for the global economy."

Stocks in China rose to their highest in three years on Tuesday on the back of hopes that the central bank will ease monetary policy further after a surprise interest-rate cut last month. Speculation that the People's Bank of China may lower banks' reserve-requirement ratios gave financial shares a boost in Shanghai.

Meanwhile, investors were showing optimism ahead of Thursday's European Central Bank (ECB) meeting, with hopes for stimulus running high after recent hints about quantitative easing from ECB president Mario Draghi.

"The ECB chief can’t keep stringing traders along with suggestions of adding government bonds to the asset purchasing scheme, but for the time being it is music to equity traders' ears," said analyst David Madden from IG.

Resource stocks lead the rise

Oil stocks such as Tullow Oil, Afren, Premier Oil, BP and Shell were making decent gains as bargain hunters stepped in following recent oil price-related losses.

Stimulus speculation was also benefitting share prices in the mining sector, with BHP Billiton, Anglo American, Glencore and Rio Tinto on the rise.

Friends Life rose after unveiling details of Aviva's proposed £5.6bn all-share takeover, which would leave the former's shareholders with a 26% stake in the enlarged group.

Interim results from Northgate were well-received by the market as the vehicle hire group hiked its dividend by more than a third and said that trading since the half-year has been "slightly ahead" of expectations. Underlying profits in the first half surged 49%.

St Modwen Properties also rose after the regeneration specialist said full-year profits would be at the top-end of market expectations on the back of an uplift in property valuations.

Royal Mail was out of favour on reports that Ofcom has disagreed with the firm's complaints about competition from rivals in the end-to-end postal delivery market. The company had said that its universal service obligation was being affected by competitors being allowed to cherry pick more lucrative areas.

Market Movers
techMARK 2,932.97 +0.33%
FTSE 100 6,725.44 +1.04%
FTSE 250 15,793.97 +0.47%

FTSE 100 - Risers
Tullow Oil (TLW) 420.20p +4.92%
Experian (EXPN) 1,047.00p +4.18%
Friends Life Group Limited (FLG) 379.80p +3.71%
Sainsbury (J) (SBRY) 238.70p +2.98%
BG Group (BG.) 928.10p +2.60%
Carnival (CCL) 2,762.00p +2.60%
Morrison (Wm) Supermarkets (MRW) 181.10p +2.49%
BHP Billiton (BLT) 1,516.50p +2.19%
Smiths Group (SMIN) 1,139.00p +2.15%
Royal Bank of Scotland Group (RBS) 393.90p +2.15%

FTSE 100 - Fallers
Royal Mail (RMG) 407.00p -2.65%
ARM Holdings (ARM) 902.00p -1.47%
Burberry Group (BRBY) 1,620.00p -0.80%
United Utilities Group (UU.) 903.50p -0.50%
St James's Place (STJ) 775.50p -0.39%
AstraZeneca (AZN) 4,693.00p -0.36%
Sage Group (SGE) 400.90p -0.30%
Persimmon (PSN) 1,536.00p -0.26%
Petrofac Ltd. (PFC) 806.50p -0.19%
Bunzl (BNZL) 1,777.00p -0.17%

FTSE 250 - Risers
Afren (AFR) 49.41p +8.21%
Oxford Instruments (OXIG) 1,215.00p +5.65%
Premier Oil (PMO) 196.60p +5.30%
Northgate (NTG) 510.00p +4.64%
Thomas Cook Group (TCG) 126.50p +4.55%
Lonmin (LMI) 178.90p +3.95%
Soco International (SIA) 282.70p +3.90%
Bwin.party Digital Entertainment (BPTY) 107.10p +3.78%
Supergroup (SGP) 897.00p +3.40%
Kaz Minerals (KAZ) 242.90p +3.36%

FTSE 250 - Fallers
EnQuest (ENQ) 44.01p -2.44%
Saga (SAGA) 153.20p -2.36%
Aveva Group (AVV) 1,370.00p -2.35%
Brown (N.) Group (BWNG) 329.00p -2.32%
Taylor Wimpey (TW.) 131.00p -2.24%
Evraz (EVR) 142.20p -2.07%
Stock Spirits Group (STCK) 246.50p -1.87%
Tate & Lyle (TATE) 596.00p -1.81%
WH Smith (SMWH) 1,251.00p -1.73%
Barratt Developments (BDEV) 452.90p -1.63%