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LONDON (Alliance News) - Stocks in London opened higher Tuesday as investors focused on US Federal Reserve Chair Janet Yellen seemingly ruling out an interest rate hike on June rather than in the prospect of a potential move in July.
The FTSE 100 was up 0.7%, or 46.67 points, at 6,320.07. The FTSE 250 was up 0.4% at 17,252.64 and the AIM All-Share was up 0.2% at 744.58.
Miners and oil stocks were again the biggest gainers in the FTSE 100, with the FTSE 350 Mining sector index adding 2.0%. Rio Tinto was up 2.5% after Citigroup upgraded the miner to Neutral from Sell, according to traders.
Royal Dutch Shell 'A' shares were up 2.2%, while BP was up 1.2%. Brent oil was holding above the USD50 line after the open Tuesday, with the North Sea Benchmark quoted at USD50.52 a barrel, compared to USD50.54 at the London equities close on Monday.
Shell said its plans concerning asset sales and debt reduction remain unchanged and it still plans to maintain its dividend this year followed by a share buyback in 2017, as the oil major set out its plan following the acquisition of BG Group.
Some observers were expecting Shell to reduce its capital expenditure budget further or to possibly extend the timeline by which the FTSE 100 company offloads a substantial amount of assets, but Shell said Tuesday all of its plans remain unchanged.
The major change Tuesday was the increase in the amount of synergies that Shell expects to deliver from its GBP35.00 billion takeover of BG Group earlier this year, as Shell now expects to deliver USD4.50 billion worth of "deal-related synergies" in 2018 compared to the original target of USD3.50 billion.
In the FTSE 250, Weir Group was the best mid-cap performer, up 4.8%, after Canaccord lifted the valves and pumpmaker to Hold from Sell, according to traders.
Meanwhile, insurer esure Group was adding 4.5% after saying it has kicked off a strategic review of its GoCompare.com Holdings price comparison service, including a possible spin off, and has appointed a new CEO for the unit.
esure said it has re-invigorated the marketing strategy at GoCompare.com in the first year after it acquired the remaining 50% of the business it had not previously owned. It also has restructured the cost base and widened the product focus of the service.
Accendo Markets analyst Michael van Dulken said the positive open is due to the "dovish tone" from US Federal Reserve Chair Janet Yellen, who appeared to rule out an interest rate hike in the US in June. However, Yellen seemed to leave on the table the possibility of an increase in July, while she warned about the potential effects of a UK vote to leave the EU in its upcoming referendum.
In a speech in Philadelphia on Monday, Yellen said "recent signs of a slowdown in job creation bear close watching". Still, Yellen said she is "cautiously optimistic", expecting the economy to continue to improve, allowing for "gradual" rate hikes at an unspecified time.
Concerns from abroad warrant close attention, Yellen warned, citing economic problems in China. Yellen also said a UK vote to exit the European Union could have "significant economic repercussions", ahead of the EU referendum scheduled for June 23.
"Based on her speech today, Yellen might still be in favour of a July rate hike, but it will require a bounce-back in June's employment figures and a vote by the UK to remain in the European Union," said Paul Ashworth, chief US economist at Capital Economics. "Overall, we still think the Fed will raise rates twice this year, in July/September and December".
In Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were up 0.8% and 1.2%, respectively.
In Asia, the Japanese Nikkei 225 index added 0.6%. In China, the Shanghai Composite finished up 0.1%, while the Hang Seng index in Hong Kong is up 1.4%.
Wall Street ended higher on Monday, with the Dow 30 up 0.6%, while the S&P 500 and the Nasdaq Composite both rose 0.5%.
Still in the economic calendar Tuesday, UK Halifax house prices are at 0830 BST and eurozone's GDP data are at 1000 BST. In the US, the Redbook index is due at 1355 BST, while the American Petroleum Association weekly crude oil stocks are at 2130 BST.
By Daniel Ruiz; danielruiz@alliancenews.com
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