LONDON (Alliance News) - UK shares were higher Friday midday, supported by a rise in the oil price and a recovery in banking stocks following losses on Thursday, with Berkeley Holdings Group missing the gains after it raised concerns about UK housing policy.
The FTSE 100 was up 0.3%, or 18.71 points, at 6.219.83.
"After a sleepy start the European indices are striving to close this busiest of weeks on a high, indubitably aided by the continued recovery from Brent crude," said Spreadex analyst Connor Campbell.
Brent crude was quoted at USD42.20 Friday midday, having touched USD42.29 earlier in the day, its highest level so far in 2016. Dollar-denominated commodities such as oil have benefited from a fall in the dollar after the US Federal Reserve's guidance for future interest rates came in below the market's expectations.
The Fed left interest rates unchanged on Wednesday in a range from 0.25% to 0.50%, as widely expected, and the projections made by members showed policymakers expect two rate hikes by the end of this year compared to the four predicted back in December.
The pound was quoted at USD1.4452 Friday midday. Sterling stood at USD1.4493 at the close Thursday, having reached a one-month high of USD1.4503 previously. Meanwhile, the euro was quoted at USD1.1294 at midday. At the close Thursday, the single currency was at USD1.1325.
In London, housebuilder Berkeley was the worst blue-chip performer, down 2.6%. The company, which focuses almost exclusively on more-expensive developments in London and the South East of England, said it is continuing to see good underlying demand for its properties, with the London market remaining stable, and expects full-year results at the top end of its expectations. It added housing market conditions in the UK remain positive, despite global macroeconomic uncertainty and the upcoming Brexit referendum.
However, Berkeley said transaction levels at the upper end of the housing market have been affected by the "significant increase" in transaction taxes over the last 18 months, which it said "will have consequential effects on both social mobility and the supply of new homes".
Banking stocks were firmly in the green, with Standard Chartered up 6.3% and Royal Bank of Scotland Group up 2.5% and Barclays up 1.3%. The FTSE 350 Banks sector index was up 1.8%.
Banks were recovering some of the ground lost on Thursday, when Norway's central bank slashed its key interest rate by 25 basis points to a new record low of 0.50%, citing the weaker economic outlook, and said the rate may be cut further this year. The bank also said that the policy rate could turn negative if the economy is exposed to new major shocks.
Even as they encourage banks to lend, negative interest rates squeeze lending margins. But negative rates are becoming more common, adopted already by the European Central Bank, the Bank of Japan and the Swiss National Bank. In the Nordic region, Sweden and Denmark also have adopted negative rates.
On Thursday, Standard Chartered ended down 1.3%, RBS down 1.5% and Barclays down 2.1%. The FTSE 350 Banks sector index finished 1.0% lower.
Smiths Group was up 3.0% after RBC Capital upgraded the engineer to Outperform from Sector Perform.
Shares in Associated British Foods were up 0.9%. The group said discussions are continuing over its potential acquisition of the remaining shares in Illovo Sugar that it does not already own. AB Foods, which owns discount fashion retailer Primark as well as British Sugar, along with agriculture and consumer goods businesses, currently holds a 51.4% interest in Illovo, a large South African sugar producer.
"Shareholders are reminded that at this stage there can be no certainty that the discussions will result in a transaction. A further announcement will be made in due course," AB Foods said.
The FTSE 250 was up 0.6% at 16,942.85 and the AIM All-Share was up 0.3% at 707.41.
Department store operator Debenhams was down 2.2%, after Investec cut it to Sell from Hold. Analyst Kate Calvert said the new chief executive, yet to be named but who will replace incumbent Michael Sharp in at some point in 2016 "will inherit a structurally challenged business".
Halma was down 2.0% after Exane BNP cut the mid-cap health, safety and environmental technology group to Neutral from Outperform, while homewares retailer Dunelm Group was down 1.3% after Merrill Lynch cut its rating to Neutral from Buy, according to traders.
In AIM, shares in fastjet were down 6.1% as further strain emerged in relations between the African low-cost airline and its shareholder easyGroup Holdings after the first said it is taking legal advice following a further spat between the pair. On Thursday, easyGroup, owned by billionaire investor Stelios Haji-Ioannou and which holds an 13% stake in fastjet, made public a letter which it had sent to fastjet on the same day, in which it raised concerns over fastjet's financial position.
In the letter, Haji-Ioannou demanded fastjet immediately resume publication of passenger numbers and load factors, claiming that planes on the route from Dar es Salaam to Nairobi were only 10-15% full when 'mystery shopping trips' were completed earlier this month.
On Friday, fastjet hit back at the publication of the letter, saying while it "welcomes constructive engagement" with all shareholders, it "cannot understand" why easyGroup published the letter without first raising its concerns with fastjet.
In the economic calendar Friday, the Bank of England's quarterly bulletin at 1200 GMT.
In the afternoon the focus will be on US central bankers. William Dudley, the president of the New York Federal Reserve, will make a speech at 1300 GMT. Boston Fed President Eric Rosengren speaks at 1500 GMT and St Louis Fed President James Bullard at 1800 GMT.
In terms of US data there is the Reuters/Michigan US Consumer Sentiment Index at 1400 GMT, and the Baker Hughes US oil rig count is at 1700 GMT.
Stocks in New York were called to open higher, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100 all seen up 0.2%.
Meanwhile, Europe's main indices were up, with the CAC 40 in Paris up 0.3% and the DAX 30 in Frankfurt up 0.2%.
Eurozone labour costs growth accelerated in the three months ended December, after easing in the previous two quarters, figures from Eurostat showed. Hourly labour costs climbed at a faster pace of 1.3% year-over-year in the fourth quarter, following a 1.1% hike in the previous quarter. In the second quarter of 2015, the rate of increase was 1.7%. Wages and salaries paid per hour worked grew 1.5% annually in the December quarter and the non-wage index went up by 0.7%.
Meanwhile, Germany's producer prices declined at a faster-than-expected pace in February, data from Destatis showed. The producer price index fell 3.0% year-on-year in February, exceeding economists' expectations for a 2.6% decrease. In January prices had dropped 2.4%. The measure has been falling since August 2013. The annual decline in February was largely driven by a 9.4% plunge in energy prices.
By Daniel Ruiz; danielruiz@alliancenews.com
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