News Column

FTSE 100 rises as energy shares lifted by strong oil price on Iraq concerns

June 18, 2014

Nick Fletcher, theguardian.com



With the prospect of a possible civil war in Iraq, oil prices are edging still higher and giving energy shares a lift.

BG is among the day's leading risers so far, up 14.5p at 1274.5p, Royal Dutch ShellB shares have climbed 25.5p to £23.97 and Tullow Oil is up 3p at 875p.

So the FTSE 100 is heading higher for the second day running, up 21.31 points at 6788.08. But Rebecca O'Keeffe at Interactive Investor said:

Despite the increased tensions in Iraq, the price of oil has stabilised and ISIS forces remain well away from Iraq's main oilfields in the south. Market fear is that the region's oil supply will be dramatically reduced which could push oil prices up sharply - but with the Kurdistan Regional Government in the north of the country likely to use their new found independence to export more crude via Turkey and with the US and Iran now allies, increasing the prospect for a resolution of the P5+1 nuclear talks, the overall impact on oil supply in the region may be less dramatic than originally feared.

As China pledged to support growth, copper traded near a two week high and helped support mining shares. Anglo American has added 6.5p to 1428.5p and BHP Billiton is 11.5p better at £18.64.

The Bank of England minutes, showing a 9 nil vote for no change but indicating concern the markets had not priced in a 2014 rate rise, had little impact on shares although the pound gained some ground. Eyes will be on the US Federal Reserve decision and press conference later, with the central bank set to cut its monthly bond buying programme by another $10bn. The statements will be scoured for any hint of possible rate rises.

Among the other gainers Whitbread continued to prosper after Tuesday's well-received results, up 51p at £43.10 as Societe Generale raised its target from £48 to £50 and Morgan Stanley moved from £44 to £46. SocGen said:

Following a positive interim management statement we are reiterating our buy rating on Whitbread and raising our price target.

In our view its current valuation does not price in: 1) the UK hotel recovery underway, particularly in the provinces; 2) the significant potential for improvement at Costa, namely vis-À-vis Starbucks, while Costa has still room to increase prices compared to competitors. For example its standard cup of coffee costs £2.45 versus £2.60 at Starbucks and £2.70 at Cafe Nero; 3) Thanks to its high occupancy rate (80.7%), and notwithstanding its famous credo "Value for Money", in our view Premier Inn has room to raise prices and potentially margins. We are confident on its ability to achieve the opening program (of rooms and coffee shops). Also 43 new Premier Inn hotels are under construction in the UK (circa 4,500 new rooms) and will be opened before the end of the full year.

United Utilities has lost 32p to 854p and Severn Trentis down 48p at £19.21 as both water companies saw their shares go ex-dividend.

The housing market was in focus, with Berkeley down 59p at £22.02 on profit taking after it reported a 40.4% rise in full year profits and issued a confident update. Barratt Developments has dropped 2.4p to 346.6p in sympathy.

Property website Zoopla has climbed to 229p in conditional trading after pricing its shares at 220p each.

Inkjet specialist Xaar continued to slump after Tuesday's warning, down another 17p or 3% to 520p.


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Source: Guardian Web


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