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LONDON (Alliance News) - Having started a holiday-shortened week brightly, London shares gave up most of their early gains Tuesday, tracking oil prices, as investors looked ahead to a speech by US Federal Reserve Chair Janet Yellen.

At midday, the FTSE 100 index was up 0.85 point, to 6,107.33.

Brent oil was quoted at USD39.44 a barrel Tuesday, versus USD40.23 at the London stock market close on Thursday, prior to a four-day weekend in the UK. US benchmark West Texas Intermediate also traded lower on Tuesday, at USD38.74 a barrel.

"Weakness in oil so far this morning carries on a pattern from last week: long positions in crude are now pushing to their highest levels in months, which may be a bearish sign," said Chris Beauchamp, senior market analyst at IG.

"The short-covering is over, but the inventory build goes on, and this will dominate more and more as the new quarter gets underway," he added.

In the FTSE 100, oil major BP was down 1.3%, while Royal Dutch Shell 'A' shares were down 0.6%, both amongst the worst performers in the index.

The FTSE 250 was up 0.2% at 16,704.16, and the AIM All-Share up 0.2% at 710.46.

In Europe, the French CAC 40 was up 0.5% and the German DAX 30 was flat.

US futures indicated a lower open for Wall Street, with the DJIA and S&P 500 both pointed down 0.2% and the Nasdaq 100 down 0.1%.

Fed Chair Yellen speaks at the Economic Club of New York Luncheon at 1720 BST. Yellen's first address since the Federal Open Market Committee's March policy announcement follows a series of hawkish comments by her colleagues over the past week.

"The market will be looking for any changes in the dovish sentiment she gave at the last FOMC meeting, when they also changed their 'dot plot' to two hikes this year from four. Particular focus on Yellen this afternoon is driven by a number of high profile Fed members being more hawkish in the last week or so," said Gajan Mahadevan FX strategist at Lloyds Bank.

On the London Stock Market, easyJet was amongst the best performers in the FTSE 100, up 1.2% to 1,519.50p, after Bank of America Merrill Lynch upgraded the stock to Buy from Neutral, with a price target increase to 1,800.00p from 1,660.00p.

The bank said easyJet has been the worst performing stock in its European airline coverage in 2016, but it believes the challenges facing the company look manageable.

In the FTSE 250, Polymetal International was down 4.7%, making it one of the worst mid-cap performers. The gold and silver miner operating in Russia and Kazakhstan said it made net earnings of USD221.0 million in 2015, swinging from a USD210.0 million net loss in 2014.

Underlying earnings, which exclude certain exceptional items, rose to USD296.0 million from USD282.0 million in 2014. Polymetal had already reported its revenue for the year, revealing a 15% year-on-year fall to USD1.44 billion from USD1.69 billion, as lower production costs were not enough to offset declines of 8% in gold prices and a 17% in silver prices.

In London's AIM market, Cadogan Petroleum confirmed it has made a "highly preliminary approach" to potentially combine the company with fellow London-listed firm Ascent Resources, but stressed there is no guarantee a deal will be signed.

Ascent said it had received a preliminary takeover approach from Cadogan late last week, and also said the approach may or may not lead to a firm offer being made. Cadogan has until April 21 to make a firm offer or walk away from the deal under UK takeover rules.

Cadogan shares were up 11%, while Ascent was the best performer in the AIM All-Share index, up 73%.

At the other end of that index, CDialogues was down 42%. The mobile marketing services company said its earnings for 2015 will be significantly lower due to weaker revenue and squeezed margins.

The company said earnings before interest, taxation, depreciation and amortisation will be less than EUR1.6 million for the year to the end of December, compared to EUR2.9 million the year earlier. The group said revenue was weaker and project margins were thinner.

Revenue in the first quarter of 2016 has been weaker than anticipated. Revenue from its new mobile network operator client in Latin America has been delayed due to integration issues, CDialogues said, and the project may now be cancelled as a result.

Still ahead in the economic calendar, the US Redbook index is at 1355 BST, just before the S&P/Case-Shiller Home Price indices at 1400 BST and US consumer confidence at 1500 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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