London close: Equities led higher by energy shares on OPEC deal

Energy shares led the FTSE 100 higher - including Royal Dutch Shell, BP and BHP Billiton - after OPEC ministers agreed during a meeting in Algeria on Wednesday to cut production to between 32.5m and 33m barrels a day, down from August output levels of 33.5m barrels. Further details of the agreement will be discussed at the next meeting on 30 November.

Oil prices were given an initial boost by the news but wavered throughout Thursday’s session on pessimism that OPEC’s plans would in fact help stabilise the market.

“While the news of a production cut is a welcome surprise, the deal will be treated with a degree of scepticism owing to the notoriously unreliable nature of OPEC discussions,” said IG market analyst Joshua Mahony.

“Most notably, the meeting goes to show that Saudi Arabia and Iran can work together, despite public spats between the two nations. Arguably despite this deal, supply will continue to outstrip demand, while US production will likely fill the gap with increased output as price rises.”

Brent crude rose 1.13% to $49.25 per barrel and West Texas Intermediate gained 1.5% to $47.79 per barrel at 1650 BST.

On the data front, the Bank of England revealed UK mortgage approvals fell to 60,058 in August from 60,925 in July - not quite as much as the consensus forecast of 59,800 but down over 17% from the peak of over 73,000 in January.

Yet last month consumer credit lending rose to £1.6bn after the dip to an 11-month low of £1.2bn in July. Annual growth in lending to corporates also picked up to 4.0% in August from 3.8% in July, contributing to an increase in the MPC’s preferred measure of bank lending to 6.6% from 6.5%.

Shares of housebuilders were in the red after the report, including Barratt Developments, Persimmon and Taylor Wimpey.

The data was released after the BoE's Prudential Regulation Authority (PRA) on Thursday launched a series of affordability checks and interest rate “stress tests” that will be introduced from January 2017.

Buy-to-let lenders will need to verify that landlords can afford to pay the mortgage under potential future interest rates of 5.5% and the PRA recommended that the interest coverage ratio, a commonly used measure of the ratio of rental income to mortgage payments, does not fall below 125%.

Elsewhere, a report showed Eurozone economic sentiment rose more than expected in September. The European Commission’s economic sentiment index edged up to 104.9 in September from 103.5 in August, beating expectations for an unchanged reading.

German unemployment rose by1,000 in September, surprising analysts who had expected a decline of 5,000 and following a 6,000 drop in August. The unemployment rate held at 6.1%, as anticipated.

German inflation picked up to 0.7% year-on-year growth in September from the prior month’s 0.4% increase, beating forecasts for a 0.6% rise.

In the US, gross domestic product rose an annual seasonally adjusted 1.4% in the second quarter, the Commerce Department said in its final estimate, up from a previous estimate of 1.1% growth. Economists had expected a 1.3% increase.

Separately, initial jobless claims rose by 3,000 to a seasonally adjusted 254,000 in the week ended 24 September, the Labor Department said. Economists had pencilled in 260,000 claims.

US pending home sales dropped 2.4% in August compared to a month ago following a 1.2% increase in July, the National Association of Realtors said. Analysts had expected no change.

Meanwhile, Atlanta Federal Reserve President Dennis Lockhart said he expected the central bank would raise interest rates "before long".

At a separate event in Dublin, Philadelphia Fed President Patrick Harker said it was time for other policy areas to do their bit to encourage growth as the Fed has already played a large part.

Fed governor Jerome Powell said in St Louis that while the US economy is going strong, the central bank can be patient in raising interest rates due to a weak global environment.

Minneapolis Fed President Neel Kashkari and Fed chair Janet Yellen are due to speak after the closing bell.

In company news, Glencore advanced following a report that Genesee & Wyoming and Macquarie Infrastructure and Real Assets are working on a bid for some of the miner’s coal operations in Australia.

Outsourcer Capita tumbled as it warned that full-year profits will be some way short of current forecasts after its third quarter was hit by a slowdown in some areas, one-off costs and recent hesitation among clients.

Fellow outsourcer Babcock slumped as it felt the impact of the sector turmoil around Capita's profit warning.

Leisure operator Merlin Entertainments pushed lower after it reported growth in revenue in the year to date but highlighted still-challenging trading.

Market Movers

FTSE 100 (UKX) 6,919.42 1.02%
FTSE 250 (MCX) 17,864.86 0.41%
techMARK (TASX) 3,497.01 -0.20%

FTSE 100 - Risers

Royal Dutch Shell 'B' (RDSB) 2,022.00p 6.67%
Royal Dutch Shell 'A' (RDSA) 1,924.50p 6.59%
BHP Billiton (BLT) 1,168.00p 6.47%
Anglo American (AAL) 980.10p 6.11%
BP (BP.) 451.00p 4.34%
Rio Tinto (RIO) 2,634.00p 4.30%
Centrica (CNA) 231.80p 3.34%
Antofagasta (ANTO) 522.50p 3.26%
Sky (SKY) 910.50p 3.17%
Glencore (GLEN) 215.85p 3.10%

FTSE 100 - Fallers

Capita (CPI) 698.00p -26.72%
Merlin Entertainments (MERL) 442.10p -5.86%
Barratt Developments (BDEV) 472.90p -4.19%
Babcock International Group (BAB) 1,046.00p -3.77%
Persimmon (PSN) 1,741.00p -3.60%
Burberry Group (BRBY) 1,353.00p -2.45%
Taylor Wimpey (TW.) 150.00p -2.41%
AstraZeneca (AZN) 5,026.00p -1.87%
Hikma Pharmaceuticals (HIK) 2,049.00p -1.40%
Travis Perkins (TPK) 1,516.00p -1.37%

FTSE 250 - Risers

Tullow Oil (TLW) 240.10p 9.84%
Riverstone Energy Limited (RSE) 1,170.00p 8.84%
Hunting (HTG) 452.70p 7.68%
Allied Minds (ALM) 335.40p 7.29%
Kaz Minerals (KAZ) 224.30p 6.51%
AO World (AO.) 168.30p 5.72%
Weir Group (WEIR) 1,658.00p 5.54%
Cairn Energy (CNE) 190.60p 5.42%
Petrofac Ltd. (PFC) 879.50p 5.01%
Amec Foster Wheeler (AMFW) 569.50p 4.98%

FTSE 250 - Fallers

Bovis Homes Group (BVS) 834.50p -3.64%
Crest Nicholson Holdings (CRST) 436.90p -3.55%
Redrow (RDW) 389.30p -3.42%
Essentra (ESNT) 490.20p -3.41%
Bellway (BWY) 2,279.00p -3.31%
Kier Group (KIE) 1,311.00p -3.25%
Berkeley Group Holdings (The) (BKG) 2,506.00p -2.64%
Thomas Cook Group (TCG) 70.00p -2.57%
Just Eat (JE.) 531.50p -2.57%
G4S (GFS) 226.00p -2.54%