LONDON MARKET CLOSE: Oil Stocks And Supermarkets Lead Market Gains

LONDON (Alliance News) - UK share prices ended higher Tuesday, supported by oil-related stocks, which surged after an OPEC official warned about a rise in oil prices in the near future.

Meanwhile, brewing giant SABMiller ended in the red after it issued a mixed trading update and a press report said it has rejected an informal takeover bid from Belgian-American rival Anheuser-Busch InBev.

The FTSE 100 index ended up 0.4% at 6,326.16 points. The FTSE 250 closed up 0.1% at 17,132.82, and the AIM All-Share finished flat at 733.55. In Europe, the CAC 40 index in Paris ended up 1.0% and the DAX 30 in Frankfurt closed up 0.9%.

Shares in New York were mixed at the London close, with the Dow 30 index up 0.2%, the S&P 500 down 0.3%, and the Nasdaq Composite down 0.9%.

In Asia, the Japanese Nikkei 225 index closed up 1.0%, while the Hang Seng in Hong Kong ended down 0.1%. The Shanghai market is closed until Thursday.

The International Monetary Fund cut its forecast for global economic growth in 2015, as the slowing economies in China and other emerging markets are felt worldwide. The IMF predicted growth of 3.1% in 2015, down from 3.3% in the official lender's July forecast. For 2016, the IMF pared its forecast to 3.6% from 3.8%.

"In an environment of declining commodity prices, reduced capital flows to emerging markets and pressure on their currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies," the IMF said in its World Economic Outlook.

A rise in crude prices on Tuesday supported London-listed oil stocks after a top official from the Organization of the Petroleum Exporting Countries said he sees oil prices on the rise in the near future. There will be "less supply in the very near future. Less supply means high prices," OPEC Secretary General Abdalla Salem el-Badri said.

Brent oil prices surged to USD51.75 a barrel at the London close from an intraday low of USD48.84 a barrel. Meanwhile, West Texas Intermediate was at USD48.41 a barrel, having touched a low of USD45.71 a barrel earlier in the day.

As a result, Royal Dutch Shell 'B' shares ended up 4.0%, BG Group added 2.8%, BP rose 2.7%, and mid-cap stock Tullow Oil closed up 6.8%.

BP completed a USD20.8 billion agreement on Monday with the US government and states on the Gulf of Mexico to settle claims over the 2010 Deepwater Horizon oil spill. The US Justice Department said the resolution - which includes federal civil environmental damages and economic damages for the five states and hundreds of local governments from Texas to Florida - is the largest settlement with a single company in the department's history.

The deal finalizes an agreement first announced in July. The initial amount of USD18.7 billion was increased under the agreement announced Monday by more than USD2 billion.

Barclays said it remains positive about the oilfield service and drilling industry in Europe as it believes delays in project development and a decline in production will lead to some form of recovery in the sector despite lower oil prices.

The bank kept Petrofac as its Top Pick in the sector, and upgraded John Wood Group to Overweight from Equal Weight. Hunting remained its least-favoured London-listed stock in the European oil-field service sector.

Petrofac ended up 1.6%, Amec Foster Wheeler up 4.4%, Hunting up 4.1% and Wood Group up 3.0%.

Outside of oil, SABMiller ended down 3.0% at 3,650.70 pence after it said group net producer revenue fell 9% in the six months ended September 30 on the year before, also falling 9% in the second quarter to the same date, which it said was due to the continued depreciation of its key operating currencies against the US dollar.

On an organic, constant currency basis, net producer revenue grew 4% year-on-year. Beverage volume increased by 2% in the second quarter and 1% in the first half, leaving NPR per hectolitre up 4% in the quarter and also 4% in the half.

Meanwhile, citing people familiar with the matter, Bloomberg said SABMiller rejected an informal takeover bid from AB InBev. The initial proposal was worth slightly over 4,000 pence per share, but executives and some SABMiller shareholders are looking for an offer closer to 4,500p. A deal at 4,500p per share would value SABMiller at around GBP73 billion.

One of the sources said SABMiller had communicated its preferred terms to AB InBev, but no final decision has yet been made on making a formal offer.

Supermarkets ended among the best blue-chip performers after Barclays suggested that Tesco's half year earnings update, due on Wednesday, can reignite the positivity generated last week by Sainsbury's upgrade to profit forecasts.

Barclays, which resumed Tesco at Equal Weight, said that while it doubts like-for-like sales will show any "dramatic progress" from the first quarter, "perhaps the company will echo the less negative recent commentary from Sainsbury on the wider UK market".

Wm Morrison Supermarkets ended up 3.2%, Tesco up 0.8% and Sainsbury's up 2.1%.

In the FTSE 250, Greggs closed up 8.2% after it reported growth in sales in the third quarter of its financial year and said it expects to report full-year growth slightly ahead of previous expectations amid favourable market conditions.

The bakery and food-to-go retailer also said the new UK National Living Wage will raise its costs, but noted that it already pays staff above the current minimum wage.

The worst mid-cap stock was Acacia Mining, down 16%. The miner said its production output in the third quarter was weaker than anticipated and said its full-year production will now fall below previous guidance.

The group does expect production to improve in the fourth quarter, but its full-year production will come in broadly flat on the 718,851 ounces it delivered in 2014, below its previous guidance for full-year production to hit 750,000-800,000 ounces.

After the close of European equities markets, European Central Bank President Mario Draghi will be speaking in Frankfurt at 1800 BST.

In the corporate calendar Wednesday, alongside Tesco's half-year results, Henderson Eurotrust and Gemfields release full-year results.

In the economic calendar, the Bank of Japan releases its monetary policy decision, while Japan's leading economic index is due at 0600 BST. German industrial production data are expected at 0700 BST. UK manufacturing and industrial production are set for 0930 BST. UK NIESR gross domestic product estimates are due at 1500 BST. In the US, EIA crude oil stocks are expected at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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