London midday: Bargain-hunting supports FTSE as stocks rebound from 18-month low

Shares had fallen to an 18-month low in the previous session.

Markets erased earlier losses after UK inflation data showed the rate of increase in consumer prices hit a 12-year low in November.

However, a drastic interest-rate hike in Russia, yet more disappointing economic data from China and a continuing slide in the price of oil were keeping investors on edge in morning trade.

London’s FTSE 100 was up just 0.6% at 6,217 by midday.

The FTSE 100 sank 1.7% to finish at 6,182.72 on Monday - its worst close since June 2013 - as commodity stocks tanked on the falling oil price. Brent crude dropped below $60 a barrel on Tuesday, a level not seen since July 2009.

The recent collapse in oil further hammered Russia’s rouble on Monday, prompting Moscow to hike interest rates from 10.5% to 17%. However, the unexpected move did little to halt the slide in the Russian currency on Tuesday, which hit a record low of 70 against the US dollar.

In economic news, Chinese factory output contracted more than expected this month. HSBC’s China manufacturing purchasing managers’ index declined from the break-even point of 50 in November to 49.5 in December, worse than the consensus forecast of 49.8.

Closer to home, the annual rate of UK inflation dropped more than expected to 1% in November, from 1.3% the month before.

Economist Howard Archer from IHS Global Insight said that inflation could dip below 1% in the near term and will likely stay below the 2% target for a “prolonged period” given the current outlook for oil and food prices. This “could make the Bank of England increasingly wary about raising interest rates at all in 2015, even if growth holds up well”, he said.

Banks in focus after stress-test results

Seven out of eight of the UK’s largest banks and building societies have passed the BoE’s latest round of stress tests, with the struggling Co-operative Bank being the only lender to have failed.

Most banking stocks were lower early on, though Lloyds gained on hopes that the company could restart its dividend payments this year. In contrast, Shore Capital said that RBS shareholders would have to wait until 2017 before payments can resume.

BT Group gained after announcing after the close that it intends to buy UK mobile network operator EE for £12.5bn in a cash-and-stock deal. The company will be giving EE’s owners Deutsche Telekom and Orange stakes of 12% and 4%, respectively.

Despite the continued fall in oil prices, Africa-focused explorer Afren jumped on the news that it has found oil after completing drilling and coring operations on Block 1101 onshore Madagascar.

Market Movers
techMARK 2,850.06 +0.90%
FTSE 100 6,216.84 +0.55%
FTSE 250 15,288.49 +0.36%

FTSE 100 - Risers
Intertek Group (ITRK) 2,237.00p +4.09%
Capita (CPI) 1,042.00p +3.99%
Hargreaves Lansdown (HL.) 936.00p +2.97%
Admiral Group (ADM) 1,256.00p +2.78%
Weir Group (WEIR) 1,757.00p +2.75%
United Utilities Group (UU.) 915.00p +2.12%
Land Securities Group (LAND) 1,137.00p +2.06%
BAE Systems (BA.) 443.80p +2.02%
Rio Tinto (RIO) 2,669.00p +2.01%
Centrica (CNA) 267.30p +1.98%

FTSE 100 - Fallers
Coca-Cola HBC AG (CDI) (CCH) 1,207.00p -2.03%
Randgold Resources Ltd. (RRS) 4,047.00p -1.15%
Sainsbury (J) (SBRY) 226.80p -1.09%
Royal Bank of Scotland Group (RBS) 359.80p -1.07%
Marks & Spencer Group (MKS) 455.30p -0.98%
Kingfisher (KGF) 317.70p -0.59%
Associated British Foods (ABF) 3,011.00p -0.50%
BP (BP.) 371.45p -0.48%
AstraZeneca (AZN) 4,429.00p -0.48%
Unilever (ULVR) 2,530.00p -0.47%

FTSE 250 - Risers
Afren (AFR) 34.66p +5.38%
Ted Baker (TED) 2,073.00p +4.17%
Foxtons Group (FOXT) 165.00p +3.12%
Ferrexpo (FXPO) 51.15p +3.08%
Balfour Beatty (BBY) 184.50p +2.96%
Supergroup (SGP) 826.50p +2.93%
Spectris (SXS) 2,052.00p +2.70%
Euromoney Institutional Investor (ERM) 1,027.00p +2.70%
Amec Foster Wheeler (AMFW) 810.50p +2.66%
Premier Farnell (PFL) 165.10p +2.61%

FTSE 250 - Fallers
Evraz (EVR) 113.80p -5.25%
EnQuest (ENQ) 32.62p -5.17%
Vedanta Resources (VED) 537.50p -5.04%
Nostrum Oil & Gas (NOG) 402.00p -3.44%
Drax Group (DRX) 458.20p -2.59%
Pace (PIC) 324.50p -2.32%
Fidelity European Values (FEV) 153.10p -2.30%
Fenner (FENR) 192.70p -2.03%
Home Retail Group (HOME) 185.40p -1.90%
Centamin (DI) (CEY) 52.55p -1.87%