London midday: Oil price rally bolsters equities

UK equities advanced on Friday as oil prices rose and the European Central Bank’s new stimulus package gave investor confidence a boost.

Oil prices rose as the International Energy Agency said there are signs that prices might have bottomed out.

“For prices there may be light at the end of what has been a long, dark tunnel,” the Paris-based organisation said in its monthly report.

The IEA estimates that oil production outside the OPEC cartel will fall by 750,000 barrels a day this year -150,000 barrels a day more than it estimated last month - easing concerns about the supply glut.

Brent crude rose 1.9% to $40.86 per barrel and West Texas Intermediate increased 2.5% to $38.83 per barrel at 1133 GMT.

Meanwhile, investors continued to digest Thursday’s ECB policy announcement.

The ECB unexpectedly slashed its main interest rate by 5 basis points (bps) to 0.00% and increased quantitative easing by €20bn to €80bn per month, starting in April. The market had priced in a €10bn increase to asset purchases.

The ECB also cut the deposit facility rate by 10bps to -0.40%, but the move was expected.

The decision to lower the marginal lending facility rate to 0.25% from 0.30%, however, was not anticipated.

Another surprise was that investment grade bonds issued by non-bank corporations will be included in the list of assets for regular purchases.

“Following yesterday’s wild, oil and Draghi-inspired, trading the European markets seem to have slept on the ECB stimulus package and decided it wasn’t so bad after all, swiftly lifting away from the month lows hit at Thursday’s close,” said Connor Campbell, financial analyst at Spreadex.

In the UK, the Office for National Statistics said the total trade deficit narrowed to £3.459bn in January from a revised £3.699bn in December.

The deficit in goods alone narrowed to £10.289bn from a revised £10.450bn, in line with economists' forecasts.

However, the goods trade deficit with the European Union widened to a record high of £8.090bn in January from £7.428bn as British imports increased.

The British Chambers of Commerce cut its forecasts for UK economic growth this year, blaming the global slowdown. The BCC has forecast gross domestic product will rise 2.2% in 2016 and increase 2.3% in 2017, compared to December projections for 2.5% growth this year and next.

“Our forecast should stand as a wake-up call,” said Adam Marshall, acting director general of BCC. “The UK’s economic performance is reasonably good when measured against our main competitors, but it’s only mediocre when compared against long-term trends.”

In company news, Old Mutual shares fell as the company said it will separate its four underlying businesses - Old Mutual Emerging Markets (OMEM), Nedbank, Old Mutual Wealth (OMW) and OM Asset Management (OMAM). The group also reported annual revenue fell 12% to £13.7bn and adjusted pre-tax operating profit rose 4% to £1.7bn, although it was up 11% at constant exchange rates.

JD Wetherspoon shares climbed as the pub operator reported a 6.2% increase in first half revenue to £790.3m and a 2.9% rise in like-for-like sales.

Aviva continued to gain a day after reporting a 20% increase in full year operating profit that was better than expected.

Computacenter slumped as it posted a 0.3% dip in full year revenue to £3.05bn, although it achieved a rise in adjusted pre-tax profit to £86.9 from £81.1m – a touch above consensus estimates.

Market Movers

FTSE 100 (UKX) 6,128.60 1.52%
FTSE 250 (MCX) 16,590.28 1.25%
techMARK (TASX) 3,087.73 1.00%

FTSE 100 - Risers

Aviva (AV.) 490.20p 5.24%
St James's Place (STJ) 893.00p 4.63%
Standard Chartered (STAN) 467.85p 4.31%
RSA Insurance Group (RSA) 452.60p 4.14%
Hargreaves Lansdown (HL.) 1,267.00p 3.94%
Royal Bank of Scotland Group (RBS) 229.50p 3.52%
Prudential (PRU) 1,363.50p 3.33%
3i Group (III) 436.40p 3.31%
Barclays (BARC) 165.00p 3.19%
Standard Life (SL.) 364.00p 3.17%

FTSE 100 - Fallers

Old Mutual (OML) 179.20p -3.29%
Marks & Spencer Group (MKS) 395.70p -2.70%
Randgold Resources Ltd. (RRS) 6,315.00p -0.71%
Berkeley Group Holdings (The) (BKG) 2,949.00p -0.34%
Inmarsat (ISAT) 910.00p 0.05%
Rexam (REX) 610.50p 0.16%
London Stock Exchange Group (LSE) 2,848.00p 0.21%
SABMiller (SAB) 4,230.00p 0.26%
Dixons Carphone (DC.) 423.10p 0.28%
easyJet (EZJ) 1,499.00p 0.33%

FTSE 250 - Risers

Marshalls (MSLH) 320.20p 6.20%
Hiscox Limited (DI) (HSX) 959.50p 4.58%
Lancashire Holdings Limited (LRE) 541.00p 4.24%
Vedanta Resources (VED) 326.40p 4.11%
Hastings Group Holdings (HSTG) 166.30p 3.87%
SIG (SHI) 143.60p 3.53%
IP Group (IPO) 168.80p 3.49%
Henderson Group (HGG) 253.30p 3.47%
Tullow Oil (TLW) 207.60p 3.33%
Amec Foster Wheeler (AMFW) 493.50p 3.31%

FTSE 250 - Fallers

OneSavings Bank (OSB) 246.00p -3.94%
Computacenter (CCC) 795.50p -3.69%
Acacia Mining (ACA) 262.10p -3.60%
JD Sports Fashion (JD.) 1,089.00p -3.54%
Ted Baker (TED) 2,811.00p -2.16%
AO World (AO.) 176.30p -1.78%
Petrofac Ltd. (PFC) 927.50p -1.70%
NMC Health (NMC) 902.50p -1.69%
Restaurant Group (RTN) 401.30p -1.55%
B&M European Value Retail S.A. (DI) (BME) 265.40p -1.52%