Bioquell Share News (BQE)

LONDON (Alliance News) - The FTSE 100 closed higher for a second consecutive day Tuesday, even as stock indices in Europe and the US retraced some of the strong gains made on Monday, with oil-related stocks and miners amongst the best-performing stocks in London's blue-chip index after months of under-performance.

The main European indices rallied strongly on Monday, and that positivity continued through into the US and then the Asian session overnight, with the Nikkei index in Japan reaching a near 15-year high. However, the rally petered out in the European session on Tuesday, as investors looked ahead to Wednesday's latest policy statement from the US Federal Reserve.

The Fed is not expected to announce an increase in interest rates yet, but traders will be paying close attention to any changes to the accompanying statement. In light of recent upbeat employment data, many analysts expect the Fed to remove the word "patient" regarding when it plans to begin raising interest rates.

The CAC 40 in Paris closed down 0.6%, giving up some of the 1.1% gain made on Monday, while the German DAX 30 ended down 1.5%, having closed up 2.2% on Monday. Both the indices had hit a new record high on Monday, and analysts are expecting the indexes to push higher still in light of the European Central Bank's quantitative easing programme that's pushing money into equities from bonds.

Sentiment wasn't helped by economic data. German investor sentiment came in below expectations and Eurozone employment growth slowed in the fourth quarter.

When the European equity markets closed, the DJIA was down 0.9%, the S&P 500 down 0.7% and the Nasdaq Composite down 0.3%, as those markets too retraced some of Monday's gains.

The FTSE 100, which closed up 0.5% at 6,837.61, was therefore the standout performer in Europe and the US, and the performance was all the more remarkable given oil-related stocks were amongst the best performing stocks despite continued pressure on oil prices. The mid-cap FTSE 250 index closed flat at 17,202.91, and the AIM All-Share index closed flat at 715.61.

At the close of the London equity markets, Brent was trading down 2.3% on the day at USD52.76 a barrel, while West Texas Intermediate was trading down 1.6% at USD43.06, after touching a six year low of USD42.83 a barrel on Monday.

Tullow Oil was the best performer in the blue-chip index, closing up 6.1%, while BG Group ended up 2.5%, BP closed up 1.6% and Royal Dutch Shell 'A' shares ended up 2.0%. Tullow shares are still down 56% over the last 6 months, while BG Group is down 28%, BP down 9.6% and Shell 'A' shares have fallen 17.8%.

In the FTSE 250, Premier Oil was the best performer on the day, up 17%, while Hunting ended up 7.7%, Ophir Energy closed up 3.2% and Petrofac closed up 3.7%. The stocks are down 58%, 45%, 50%, and 17.7% for the last six months, respectively.

UBS analyst Jon Rigby joined peers Tuesday in predicting further oil price volatility ahead. Rigby expects prices to fall in the second quarter as demand for OPEC oil falls while the cartel keeps pumping above its quota and US oil production adds to increasing stocks.

Mining stocks, which have also come under sustained pressure in London in recent months due to falling prices for commodities like iron ore and due to concerns about slowing growth in China, also performed well on Tuesday. The FTSE 350 mining sector index ended up 1.8%, behind the rises for the oil producer sector index and the oil equipment sector index and utilities sector indexes.

Mining giant BHP Billiton closed up 2.6% as it recommended shareholders approve the proposed demerger of South32 to allow the group to streamline its activities and make cost reductions, and said both companies remain committed to its dividend policies.

"The demerger will simplify BHP Billiton and has the potential to unlock shareholder value, while creating a new global diversified metals and mining company with a significant industry presence in each of its major commodities," said Chairman Jac Nasser.

If separated, the majority of South 32's assets will be based in the southern hemisphere, mainly focusing on Australian and South African production of alumina, aluminium, coal, nickel, manganese, silver, lead and zinc. BHP Billiton would then be focused on copper and oil and gas assets.

Miner Antofagasta bucked Tuesday's trend, closing down 2.8%. The company reported lower 2014 earnings, as expected, as revenue was hit by a drop in copper prices and higher cash costs, and it cautioned that copper prices are set to remain volatile this year and it's keeping its dividend policy under review while it tries to resolve issues at the Los Pelambres mine in Chile.

It reported a pretax profit of USD1.57 billion for 2014, down from USD2.08 billion in 2013, as revenue declined by 11% to USD5.29 billion, from USD5.97 billion, largely on the back of an 8.5% decline in realised copper prices, a 7.1% decline in gold prices, as well as a small decline in sales volumes.

It said it will pay a final dividend for 2014 of 9.8 cents a share, bringing the total dividend to 21.5 cents, down sharply from 95.0 cents in 2013. That represents a dividend payout ratio to earnings of 35%, the same level as in 2013, but below analysts' hopes for an increase to 37.09%.

The US dollar's rise against the euro paused on Tuesday ahead of the Fed policy statement, but the greenback is expected to rise again if the policy makers drop the word patient from their forward guidance, as expected.

"The EUR/USD is likely to remain range bound until after the release of the FOMC statement on Wednesday in which the Fed is likely to drop the word “patient” used to describe the eventual first interest rate hike," said Forex.com technical analyst Fawad Razaqzada.

"If the Fed is no longer “patient”, it may increase speculation that the central bank will increase interest rates by as early as June, and cause the dollar to rally and the EUR/USD to slump," he said.

The euro was trading slightly higher at USD1.0605 when the European equity markets closed, while the pound was down at USD1.4742, a level it hasn't seen since mid-2010.

The Fed's Open Market Committee meeting concludes at 1800 GMT on Wednesday, with a press conference due at 1830 GMT.

Investors in London will also be keeping an eye on the final UK budget ahead of May's general election, with Chancellor of the Exchequer George Osborne set to start speaking at 1230 GMT. He's expected to announce further measures to help investment in the North Sea and a further shakeup of the annuities market in his speech.

Ahead of that, the Bank of England releases the minutes from its most recent monetary policy committee meeting at 0930 GMT. The UK ILO unemployment rate is due at 0930 GMT, while eurozone trade balance is at 1000 GMT. In the US, EIA crude oil stocks change is at 1430 GMT.

In the corporate calendar Wednesday, Phoenix Group Holdings, Hochschild Mining, Bioquell, UTV Media, Cape and Burford Capital will release full year results. Smiths Group will publish half year results, while Imagination Technologies Group will issue a trading statement.

By Daniel Ruiz; danielruiz@alliancenews.com

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