LONDON MARKET CLOSE: Oil Rally Helps FTSE 100 To Highest 2016 Close

LONDON (Alliance News) - A rally in oil prices propelled the London stock prices higher Friday and helped the FTSE 100 close at its highest level of the year so far.

The FTSE 100 closed up 1.1%, or 67.52 points, to 6,204.41, its highest close since the end of December. Over the course of the week, the FTSE 100 rose 1.0% largely tracking movements in the oil price.

The FTSE 250 ended the day up 0.7%, or 115.49 points, to 16,829.72. The AIM All-Share ended up 0.3%, or 2.37 points, to 719.39.

European stocks also rallied, with the CAC 40 in Paris ending up 1.4% and the DAX 30 in Frankfurt up 1.0%.

On Wall Street at the London close, the DJIA was up 0.5%, the S&P 500 was up 0.6%, and the Nasdaq Composite was up 0.3%.

Higher oil prices were behind much of the gains in global stocks as traders anticipated next week's meeting of oil producers in Doha to discuss a freeze in production.

However, there are uncertainties around whether a deal to halt production can be met on April 17, given the conflicting messages from oil players recently.

On several occasions Iran has ruled itself out of a freeze to production as it looks to regain market share after international sanctions on it were lifted. Last week, Saudi Arabia's deputy crown prince, Mohammed bin Salman, signalled in an interview with Bloomberg that if any country raises output, Saudi Arabia will follow suit.

Contradicting that, earlier this week Kuwait's OPEC governor said the meeting will deliver a freeze in output.

Dougie Youngson, oil and gas research director at finnCap believes even if a deal is reached in Doha, a freeze in output will not be enough to address the oversupply in the market.

Youngson said there is increasing doubt as to whether, even if a freeze is put in place, the impact will have any real effect.

"The hedge fund community is steadily shifting to taking long positions which should help remove some price volatility in the lead up to Doha," Youngson said.

At the close, Brent oil traded at USD41.79 a barrel, higher than the USD38.93 a barrel at the London stock market close on Thursday. US benchmark West Texas Intermediate was at USD39.63 a barrel, compared to USD36.84 a barrel late Thursday.

The rise in oil prices was supporting shares in oil producers. Royal Dutch Shell 'A', up 4.0% and BP, up 3.3%, were both amongst the best performers in the FTSE 100.

Gold moved higher during the day. At the close of London equity trading on Friday the metal traded at USD1,240.44 versus 1,238.74 at the same time on Thursday.

In UK economic news, industrial production declined unexpectedly in February and the visible trade deficit widened from last year, signalling weak growth prospects for the first quarter.

Figures from the Office for National Statistics showed industrial output fell 0.3% month-on-month in February from January, when it grew 0.2%, and was below expectations for growth of 0.1%.

Manufacturing output dropped 1.1% on a monthly basis, reversing a 0.5% rise in January and bigger than a 0.2% fall forecast by economists.

Another report from the ONS showed trade in goods logged a bigger-than-expected deficit of GBP12 billion in February compared to a GBP11 billion shortfall a year ago. Economists had forecast a GBP10.5 billion shortfall.

The February trade and industrial production data provided a double whammy of very disappointing news for the UK economy that bodes ill for first quarter growth prospects, IHS Global Insight Economist Howard Archer said.

It reinforces the belief that GDP growth will have been no better than 0.4% quarter-on-quarter in the first quarter, the economist said. The first estimate of first quarter UK GDP is on April 27.

At the European equity market close, the pound traded the dollar at USD1.4125, versus USD1.4096 at the same time on Thursday.

The euro was at USD1.1414 Friday compared to USD1.1373 on Thursday.

On the London Stock Exchange, consumer credit reference agency Experian, down 1.3%, and asset manager Schroders, down 1.0%, both ended amongst the biggest fallers in the FTSE 100 after receiving downgrades. HSBC cut Experian to Reduce from Buy, and Exane BNP cut Schroders to Neutral from Outperform.

Vectura Group closed as the best performer in the mid-cap index, up 7.5%. The respiratory pharmaceuticals company and Jordan-founded drug maker Hikma Pharmaceuticals said the new drug application for their fluticasone propionate and salmeterol inhalation powder was accepted for filing by the Food & Drug Administration in the US.

The pair are working together on the inhalation powder, which is a generic version of GlaxoSmithKline's Advair Diskus, used to treat asthma and maintain treatment of airflow obstruction and reducing exacerbations in patients with chronic obstructive pulmonary disease. Hikma shares ended up 0.5%, while Glaxo shares ended down 0.2%.

Elementis closed as the worst performer in the FTSE 250, down 6.2% after Berenberg downgraded the company to Hold from Buy, citing "a full-looking valuation" and the "potential reduction in pricing and margins" within Elementis' chromium division.

DFS Furniture ended down 6.1% to 301.45 pence after private equity firm Advent International Corp said it agreed to sell a 14.1% stake in the sofa retailer for GBP90.0 million.

Advent agreed to sell 30.0 million shares at 300.00p per share to institutional investors, leaving the private equity firm with a 24.1% stake in DFS, held through 51.4 million shares. Settlement of the accelerated bookbuild placing is expected to take place on Tuesday next week, Advent said in a statement.

In a very thin economic calendar Monday, there are Japanese machine orders at 0050 BST, Chinese inflation data at 0230 BST and Italian industrial output at 0900 BST.

In the UK corporate calendar, there are full-year production results from FTSE 250 miner Vedanta Resources. There are also full-year results from online gaming company GVC Holdings, hosted managed and cloud computing services provider Nasstar, mobile marketing services company CDialogues, and copper miner Central Asia Metals.

US earnings season gets underway Monday with traditional curtain-raiser Alcoa reporting after the Wall Street close.

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

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