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LONDON (Alliance News) - UK shares were higher Tuesday at midday in London, with commodity stocks recovering as oil prices came off Monday's lows, while New York was called for a positive open ahead of the start of the two-day US Federal Reserve policy meeting.

The FTSE 100 index was up 1.8% at 5,981.23 points, the FTSE 250 up 0.9% at 16,923.44, and the AIM All-Share up 0.5% at 720.57. In Europe, the French CAC 40 index was up 2.2% and the German DAX 30 up 2.0%.

US stock were seen higher, with the Dow Industrials and the S&P 500 called up 0.8%, while the Nasdaq 100 was seen up 0.6%.

European indices and US stock futures were shrugging off a negative close in Asia. The Japanese Nikkei 225 index ended down 1.7%, while in China, the Shanghai Composite and the Hang Seng in Hong Kong ended down 0.3% and 0.2%, respectively.

"Investors appear to be relatively unconcerned that tomorrow's Fed [decision] is still on the calendar, as year-end seasonality kicks in," said IG senior market analyst Chris Beauchamp.

"Given the heavy losses of the first weeks of December, a bounce was always likely, and while it is hard to think how exactly [Fed Chair] Janet Yellen can stoke an equity rally tomorrow, it is entirely plausible that the heart will supplant the head for now, with investors deciding to enjoy the year-end bounce and endure the hangover come January," Beauchamp added.

The Fed will start its meeting later in the day and will announce its decision on Wednesday at 1900 GMT. The US central bank is widely expected to raise US interest rates for the first time in almost 10 years, meaning since June 2006.

Oil stocks and miners were contributing the majority of the points to gains by the FTSE 350, after having been sold on Monday as oil prices fell to new seven-year lows.

Brent traded at USD38.55 a barrel at midday compared to the USD36.32 a barrel low it touched on Monday. West Texas Intermediate was at USD36.80 a barrel, compared to its Monday low of USD34.51 a barrel.

Blue-chip Royal Dutch Shell 'A' was up 3.4%, BG Group up 3.6% and BP up 2.3%, while mid-cap Tullow Oil was adding 7.4%.

Shares in Tullow also were in favour after it said it has encountered a net oil pay at the Etom-2 well in northern Kenya and said its Ngamia well in the country has produced thousands of barrels of oil per day under test conditions. The FTSE 250-listed oil producer said the Etom-2 well on Block 13T encountered 102 metres of net oil pay in two columns after being drilled to a total depth of 1,655 metres.

Among mining stocks, Glencore was up 5.0%, BHP Billiton up 4.0% and Rio Tinto up 3.1%. However, the FTSE 350 mining sector index was still hanging around its lowest levels since 2004.

FTSE 100-listed supermarkets were amongst the top gainers after the latest UK market share data from Kantar Worldpanel for the 12 weeks to December 6.

J Sainsbury was up 4.4% after the Kantar survey revealed its sales in the period rose 1.2% to GBP4.35 billion from GBP4.30 billion a year earlier, helping its market share rise to 16.7% from 16.5%.

Of the UK big four, Sainsbury's was the only one to have delivered higher sales and market share year-on-year, as its rivals continue to feel the effect of discounters Aldi and Lidl. Those two once more produced sterling growth in the period, with Aldi sales up 15% and Lidl sales rising 18% year-on-year, as the pair's combined market share stayed at 10%.

Tesco shares were up 3.6%. It saw sales decline 3.4% in the period, with its market share shrinking to 28.0% from 29.1%. Wm Morrison Supermarkets rose 4.9%. It had a sales decline of 2.0%, while its market share slipped to 11.0% from 11.2%.

In the FTSE 250, AVEVA Group was down 35%. The engineering software and IT systems provider said its proposed acquisition of industrial software assets from France's Schneider Electric SA has been terminated. The deal would have effectively been a takeover of AVEVA by Schneider.

AVEVA and Schneider reached a non-binding agreement in July, under which AVEVA would acquire industrial software assets from Schneider in cash and shares, giving Schneider a 53.5% stake in the FTSE 250-listed company. The deal had been valued at around GBP1.3 billion.

But on Tuesday, AVEVA said the pair had been unable to reach a definitive agreement and said the talks had been terminated. The non-binding nature of the agreement means no break-fees will be paid by either side.

Data from the Office for National Statistics showed UK inflation turned positive in November largely driven by transport costs, while factory gate prices continued their downward trend.

Consumer prices edged up 0.1% year-on-year in November, reversing a 0.1% fall in October, and matching economists expectations. Month-on-month, consumer prices remained flat after rising 0.1% a month ago, but beating estimates for a 0.1% drop.

Core inflation, which excludes energy, food, alcoholic beverages and tobacco, rose slightly to 1.2% in November, in line with expectations, after adding 1.1% in October.

Another report from ONS showed that output prices fell 1.5% year-on-year compared with a decrease of 1.4% in October. That was larger than a 1.3% drop forecast by economists. On a monthly basis, output prices slid 0.2%, faster than October's 0.1% fall, while economists expected output prices to come in flat on month.

A third report from the ONS showed that UK house price inflation accelerated for the third straight month in October to the highest level in seven months. The house price index rose 7.0% year-over-year in October, faster than the 6.1% hike in the previous month. The latest rate of increase in house prices was the fastest since March this year, when they grew 9.6%.

Meanwhile, German economic confidence improved for the second straight month in December, the survey carried out by the Mannheim-based Centre for European Economic Research showed Tuesday. The ZEW Indicator of Economic Sentiment rose by a more-than-expected 5.7 points to 16.1 in December. This was the highest score since July, when it was 29.7. The expected level was 15 for December.

The pound and the euro experienced some gyrations following the data, with sterling broadly at the same level after as prior to it, quoted at USD1.5161. The single-currency was at USD1.1008. At the London close Monday, the pound traded at USD1.5136 and the euro at USD1.1040.

Still ahead in the economic calendar, the New York State manufacturing index is at 1330 GMT, alongside US consumer price inflation also at 1330 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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