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(Alliance News) -Â Brent oil's steady trade around three-year highs gave London's FTSE 100 index a boost on Tuesday by lifting shares in BP and Royal Dutch Shell, overshadowing fears that a sustained rise in energy prices will put further pressure on the global economy.
The FTSE 100 index was up 46.17 points, or 0.7%, at 7,057.18 midday Tuesday. The mid-cap FTSE 250 index was up 126.95 points, or 0.6%, at 22,781.87. The AIM All-Share index was down just 0.60 of a point at 1,220.61.
The Cboe UK 100 index was up 0.6% at 701.00. The Cboe 250 was up 0.5% at 20,641.23 and the Cboe Small Companies flat at 15,586.36.
In mainland Europe early Tuesday afternoon, the CAC 40 in Paris was up 0.7%, while the DAX 40 in Frankfurt was up 0.3%.
"OPEC's decision not to lift production volumes gave oil prices a lift into Tuesday, helping the FTSE 100 to solid gains as index heavyweights BP and Shell gushed higher," said AJ Bell investment director Russ Mould.
BP shares were 1.2% higher at midday, while Royal Dutch Shell 'A' and 'B' stock gained 0.6% and 1.0% respectively. This extended gains on Monday, when BP rallied 1.9% and Shell 'A' and 'B' shares 1.5%.
Brent oil was trading at USD81.77 a barrel on Tuesday, softening a touch from USD81.85 late Monday but the price is still around its best level in three years after OPEC decided to stick to planned moderate increases in output for November despite soaring crude prices.
The suspicion that the club may not authorise extra increases in production had already sent the market surging as the meeting opened, with US oil prices hitting their highest level since November 2014.
US President Joe Biden's administration urged increased output in August, when National Security Advisor Jake Sullivan said the cartel was not doing "enough" to boost oil production.
A recent rise in oil prices has increased investor concern over growing inflationary pressures, hampering economies as they bounce back from the virus pandemic.
This was demonstrated in business survey data on Tuesday.
The UK service sector saw growth strengthen in September despite supply chain issues and rising costs. The IHS Markit/CIPS services business activity index registered 55.4 points in September, up from August's six-month low of 55.0 and remaining well above the no-change mark of 50.
September's reading means that the UK's service sector recovery accelerated from August. It was not all good news last month, however.
"Rapid rises in fuel, energy and staff costs were passed on to customers in September. The rate of prices-charged inflation accelerated sharply since August and was the fastest since the survey began in 1996," Markit said.
The story was similar in the eurozone, with the bloc seeing growth slow in September as input prices surged at a record-equalling pace.
The eurozone final services PMI fell to 56.4 points in September from 59.0 in August. The services PMI was dragged closer to the 50 no-change mark, suggesting growth slowed. It did, however, beat the earlier flash estimate of 56.1.
Input costs rose at the fastest rate since mid-2008, while output price inflation was around its highest level in over two decades.
Also on Tuesday, figures from Eurostat showed eurozone producer price inflation accelerated to 13% in August from 12% in July.
The euro traded at USD1.1598 midday Tuesday, down from USD1.1621 late Monday. Sterling was quoted at USD1.3623, firming on USD1.3605 at the London equities close on Monday.
Gold was quoted at USD1,755.95 an ounce on Tuesday, lower than USD1,764.50 on Monday.
Further comment on inflationary pressure is likely when the IHS Markit US services PMI is released at 1445 BST, followed by the ISM services PMI at 1500 BST. Ahead of this, Wall Street is on course for a higher start.
The Dow Jones and S&P 500 were pointed up 0.3% and the Nasdaq up 0.4%. The tech-heavy Nasdaq Composite index was helped as Facebook shares rose 1.4% pre-market, after a 4.9% tumble on Monday following a company-wide outage, meaning users could not access the Facebook, Instagram or Whatsapp social media platforms.
Meanwhile, some London-listed companies on Tuesday flagged issues over rising costs and supply chain disruption.
Industrial turnaround firm Melrose Industries forewarned that supply constraints in the automotive industry are hurting trading, as the problem of semiconductor chip shortages rumbles on.
The FTSE 100 firm's Automotive and Powder Metallurgy divisions were particularly badly hit by supply issues; however they both still will be able to deliver a full year margin of around twice that achieved last year, Melrose said.
While underlying demand is strong, the global semiconductor shortage has led to 'in month cancellations' from customers rising from a normal rate of around 1% to a current rate of 20% to 25%.
Melrose was the worst performer in the FTSE 100 at midday, falling 2.3%.
While mid-cap sausage roll maker Greggs also warned of supply issues, shares were buoyed by an outlook upgrade and some ambitious five-year plans. The baker's shares rose 9.8%, topping the FTSE 250 index.
Greggs said like-for-like sales in the three months to October 2 were 3.5% higher than they were two years earlier, so before the onset of the pandemic. This growth was achieved against a backdrop of strengthening cost pressures, it said.
"Greggs has not been immune to the well-publicised pressures on staffing and supply chains, and we have seen some disruption to the availability of labour and supply of ingredients and products in recent months," said Greggs. Nonetheless, it said its strong performance in the third quarter lends confidence for the full-year, and Greggs expects its annual result to be ahead of previous internal expectations.
Greggs was on Tuesday hosting a capital markets day, at which it was to unveil plans for 500 of its shops to be open until 8pm by the end of next year as part of a bid to double revenue to around GBP2.4 billion by 2026.
John Moore, senior investment manager at Brewin Dolphin, said: "Although supply chain issues and rising input costs are very real near-term challenges, Greggs appears to be handling them well so far and has accounted for this in its strategy. If the company can execute its plan as it describes, in time Greggs could make the ultimate leap to the FTSE 100."
Transport and logistics firm Wincanton rose 7.9% as it backed full-year profit expectations despite a lorry driver shortage.
"Wincanton continues to work closely with its customers in taking active steps to address the impact of the shortage of HGV drivers in the UK and to both attract and retain drivers," it said, adding that profit has not been affected by the recent scramble for motor fuel in the UK.
Elsewhere in London, shares in Hotel Chocolat rose 10%. The chocolate maker and retailer reported a double-digit annual revenue increase and a swing to profit, with results ahead of expectations.
Revenue grew 21% to GBP164.6 million in the year to June 27 from GBP136.3 million the year before. It swung to a pretax profit of GBP7.8 million from a loss of GBP7.5 million.
"This pleasing set of results primarily reflects the strong performance of the group's multichannel proposition and the group's fast-growing active customer database," Hotel Chocolat said.
It opted not to pay a dividend given opportunities to invest fur further growth, and plans to recommence payouts "when it is appropriate to do so".
By Lucy Heming;Â lucyheming@alliancenews.com
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