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Tuesday, June 6, 2023

Britain’s FTSE edges higher as battered oil stocks rebound

Britain's FTSE edges higher as battered oil stocks reboundLONDON: Britain’s top share index edged higher on Tuesday to extend a recent rebound from last week’s lows, led by a recovery in Tullow Oil as investors bought into beaten-down oil stocks.

Supermarkets and commodity stocks were mixed after updates from J Sainsbury and miner Antofagasta.

The blue-chip FTSE 100 index, which had its worst weekly loss in 2015 last week, rose 0.5 percent, up 33.53 points at 6,837.61 points by the close.

It was 2 percent below a record high of 6,974.26 points reached on March 2. Rallies in oil and utility stocks helped to support the market.

Tullow Oil rose 6.1 percent to retrace all of the previous session’s fall, while British Gas owner Centrica rose 5 percent.

Traders said appetite was returning to the market for some of the worst-performing shares this year, with traders also speculating that Wednesday’s budget may provide tax relief for the oil sector. Tullow has been the top FTSE faller this year, down more than 30 percent in 2015 as oil prices have dropped.

Centrica is the third-biggest, down nearly 15 percent in the build-up to May’s general election, after which utilities could come under increased regulatory pressure.

“When you see stocks at these levels, investors start to see proper upside,” Mark Foulds, sales trader at ETX Capital, said.

“Oil might continue to drop, but there is still value.” Sainsbury was one of the most heavily traded stocks on the FTSE 100, losing early gains to trade 0.8 percent lower. While investors viewed the company’s latest results as less negative than feared, it posted a fifth straight quarter of declining underlying sales. Jefferies cut its target price in light of the update.

The supermarket operator traded 1.7 percent of its 90-day average trading volume.

While it said it did not expect the trading environment to improve any time soon, it expressed confidence in its ability to outperform rivals.

“The worry for investors will be that the recovery process is not happening fast enough for Sainsbury’s, which should be in a position to react quicker than its peers,” Lewis Sturdy, dealer at London Capital Group, said in a note.

Tesco fell 1.7 percent and Wm Morrison dropped 2.2 percent, with traders saying that competition from Sainsbury and cut-price grocers such as Aldi and Lidl could increase pressure on their businesses.

The heaviest faller was copper miner Antofagasta, down 2.8 percent after reporting lower earnings and slashing its dividend due to uncertainty over a lawsuit over water supply to its main mine.

“Antofagasta’s numbers were a factor, and with the supply of water to the mine under threat, we could see costs rising further in the face of falling commodity prices,” Zeg Choudhry, managing director of LONTRAD, said. Shares in fellow miner BHP Billiton rose 3.3 percent after details of the $ 13 billion spin-off of its South32’s mines and refineries assets.

Copyright Reuters, 2015

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