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LONDON (Alliance News) - An increase in oil prices boosted UK stocks Tuesday, after Interfax reported that Russia and Saudi Arabia reached a consensus on freezing oil output.
The Russian news agency cited a diplomatic source in Doha ahead of a meeting of oil producers in Doha on Sunday.
"The agreement has theoretically been in place since February 16, it's the details of quotas and the involvement of other countries, notably Iran that are yet to be resolved," said Jasper Lawler, market analyst at CMC Markets.
Brent oil spiked to a four-month high of USD44.50 a barrel after the Interfax report, and was at USD44.29 at the London close. At the same stage on Monday, Brent was at USD42.90 a barrel.
The price of gold was at USD1,254.90 an ounce at the London close Tuesday, versus USD1,257.40 at the same time Monday.
The FTSE 100 ended up 0.7%, or 42.27 points, at 6,242.39, its highest closing level since the end of December. The FTSE 250 rose 0.1%, or 16.49 points, to 16,795.30 and the AIM All-Share ended up 0.6%, or 4.05 points, to 725.70.
European shares also ended higher. The CAC 40 in Paris and the DAX 30 in Frankfurt both ended up 0.8%.
On Wall Street at the London close, the Dow Jones Industrial Average was up 0.9%, the Standard & Poor's 500 was up 0.8% and the Nasdaq Composite was up 0.5%.
The pound received a brief boost after data from the Office for National Statistics showed that the UK consumer price index climbed 0.5% year-on-year in March, faster than the 0.4% forecast and the 0.3% increase seen in February. It was also the biggest increase in prices since December 2014, when CPI also rose 0.5%.
Core inflation, which excludes energy, food, alcoholic beverages and tobacco, accelerated to 1.5% in March from 1.2% in February.
Higher air fares and clothing prices contributed to the increase, partially offset by a fall in food prices. Due to the early timing of Easter, air transport costs surged 23% between February and March.
Kallum Pickering, senior UK economist at Berenberg, said the distortion caused by the earlier Easter distracts from a trend of increasing underlying headline inflation. He expects the headline rate of inflation to hit 1.6% by the final quarter of the year, moving closer to the Bank of England's 2.0% target.
Pickering said inflation looks set to be supported by relative stability in oil prices compared to steep falls seen last year, while consumer spending and business investment stay firm. This could bring an interest rate increase from the Bank of England in November this year, assuming the UK votes to stay in the EU in a referendum scheduled for June 23.
"The ongoing acceleration in inflation, alongside consumer credit growth at a decade high, household saving at a historic low and the labour market at full employment begs the question if near-zero rates are still appropriate," the economist said.
The International Monetary Fund pared back its forecasts for global growth and warned Tuesday that a British exit from the EU would be a further blow to the global economy. The Washington-based crisis lender lowered its forecast for 2016 global growth to 3.2%, down 0.2 percentage points from the outlook issued in January.
"In the UK, the planned June referendum on EU membership has already created uncertainty for investors," IMF chief economist Maurice Obstfeld said. "A 'Brexit' could do severe regional and global damage by disrupting established trading relationships." He said the potential for a Brexit is weighing on investor confidence in Britain.
The pound shot higher against the dollar after the inflation data but gave up those gains in the afternoon. At its highest point sterling was at USD1.4348, before falling to USD1.4239 at the London equities close. At the same stage Monday, the pound was at USD1.4260. The euro traded the dollar at USD1.1386 at the close Tuesday against USD1.1428 Monday.
In UK corporate news, Anglo American was the top performer in the FTSE 100, up 6.9% after the company said the value of the third sales cycle of rough diamonds carried out by its De Beers unit since the start of 2016 hit USD660.0 million, considerably higher than the previous two sales cycles.
The value of the second sales cycle amounted to USD617.0 million whilst the first only delivered a value of USD545.0 million.
That means the value of the most recent sales cycle was 21% higher than the first sales cycle of 2016 and will likely give shareholders more confidence that the positive trend will continue in the near-term.
Anglo American had previously said the positive trend in rough diamond sales started last year and had stretched into 2016, and on Tuesday said continued stability for polished diamond prices has supported a "reasonably positive environment" for rough diamond sales thus far.
Carclo ended as the best performer in the FTSE All-Share, up 12%. The technical plastics supplier said trading for the year to the end of March was in line with its expectations.
Carclo said its Technical Plastics division benefited from a much stronger trading performance in the second half of the year, with a good performance in the US and robust demand in the UK. Carclo said its new facility in China is now fully-operational and it is expanding capacity as its sites in Bangalore in India and Tucson, Arizona.
Cadmium-free quantum dot maker Nanoco Group said it looks forward with confidence as it reported a widened pretax loss for its first half.
For the financial half year to end-January the company reported a pretax loss of GBP6.3 million, widened from a loss of GBP4.1 million a year before, as revenue fell to GBP290,000 from GBP1.6 million, and it saw research and development and administrative costs rise. Nanoco attributed the fall in revenue to a GBP1.3 million milestone payment it had received in the previous period that was not repeated.
The European Commission is continuing to consider the use of heavy metal cadmium, which is currently restricted under European environmental law, in quantum dots. The commission is considering an exemption to allow the use of quantum dots containing cadmium for a limited period, and is expected to reach a decision on this in the coming months.
Nanoco, whose quantum dots do not contain the heavy metal, said it believes it would be "environmentally irresponsible to prolong the use of cadmium-based quantum dots." The stock ended down 6.6%, the worst performer in the FTSE All-Share index.
Looking ahead to the economic calendar on Wednesday, Chinese trade data are at 0300 BST. After the London open, the Bank of England's credit conditions survey is at 0930 BST, before euro area industrial production at 1000 BST. Later in the day, US MBA mortgage applications are at 1200 BST, retail sales and US producer price index are both at 1330 BST and the Energy Information Administration's crude oil stocks are at 1530 BST.
The highlight in the UK corporate calendar is full-year results from Tesco. The grocer is expected to report a return to profit after a devastating financial year 2015.
The UK's largest retailer has spent the last year trying to rebuild the business after it suffered a GBP6.38 billion pretax loss in financial 2015, when it booked a staggering GBP7.0 billion of impairments, writedowns and restructuring charges. It made a GBP2.26 billion pretax profit in financial 2014.
There are also half-year results from books and stationery retailer WH Smith. Jupiter Fund Management issues a trading statement as does car parts and bicycle retailer Halfords Group, housebuilder and regeneration company Countryside Properties, residential property developer Telford Homes and recruiter Robert Walters. FTSE 100 gold miner Fresnillo reports fourth quarter production report.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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