LONDON MARKET MIDDAY: Shell Leads FTSE 100 As Oil And Pound Both Rise

LONDON (Alliance News) - Stocks prices in London continued their march higher midday Tuesday, as comments from Federal Reserve Chair Janet Yellen poured more cold water on prospects of an immediate US interest rate hike, while the pound reversed its losses from Monday after two polls put the Remain campaign narrowly ahead.

A new poll from ORB on behalf of The Daily Telegraph, showed the Remain camp's lead had narrowed to only one percentage point, having been ahead five points when the poll was conducted a week earlier.

The ORB poll had remain on 48%, against 47% for Leave. This compares to 51% saying they would vote to remain a week earlier, against 46% for Leave.

But a YouGov telephone poll for The Times showed the Remain camp on 43%, against 42% for Leave. In contrast to the ORB poll, this was a gain for the Remain campaign, which had been on 41% in the previous telephone poll by YouGov a week earlier, against 43% for Leave.

The YouGov telephone poll is in line with a general pattern whereby telephone polling tends to favour the Remain camp, while online polling has tipped toward the Leave cause.

The polls helped the pound to make up the ground it lost on Monday, when three surveys put the Leave campaign ahead. Sterling traded the dollar at USD1.4587 at midday Tuesday, compared to USD1.4461 at the London equities close on Monday.

"The two polls overnight have lent support to the pound early in today's session, although the spike from around 1.4480 to 1.4640 shortly after 5am in the UK has been attributed to a fat finger trade," noted Craig Erlam, senior market analyst at Oanda. "With the polls pointing to a very tight race, the next couple of weeks could become increasingly volatile for the pound."

In equities, the FTSE 100 index traded up 0.4%, or 27.09 points at 6,300.49. The FTSE 250 was up 0.4% at 17,255.23, and the AIM All-Share was up 0.3% at 745.43.

In Europe, the CAC 40 in Paris was up 1.1%, and the DAX 30 in Frankfurt was up 1.7%.

The euro area economy grew more than previously estimated in the first quarter, revised data from Eurostat showed. Gross domestic product climbed 0.6% sequentially instead of 0.5% estimated previously. This was also faster than the 0.4% growth registered in the fourth quarter of 2015.

On a yearly basis, GDP growth held steady at 1.7% in the first three months of 2016, revised up from 1.5%.

Ahead of the open in New York, futures pointed the Dow Jones Industrial Average and the S&P 500 indices both up 0.3% and the Nasdaq 100 up 0.4%.

Stocks in the UK and Europe were supported by Fed Chair Yellen's speech late Monday, her first since Friday's awful US jobs report, which she described as "disappointing". After the economy generated just 38,000 jobs in May, "recent signs of a slowdown in job creation bear close watching," Yellen said.

Whilst otherwise delivering a generally upbeat assessment of US economic conditions and saying this will allow for "gradual" rate hikes, Yellen omitted her recent assessment that interest rate hikes were likely in the coming months.

"With various [Federal Open Market Committee] members giving hawkish views, Yellen was able to remain balanced in her speech last week. However, given the poor data set, she appears to be giving a clear signal to the market, that with Brexit worries and the recent poor data- a rate hike looks off the cards for June," said Ana Thaker, market economist at PhillipCapital UK.

Royal Dutch Shell was leading the gainers in the FTSE 100 with 'A' and 'B' shares both up 2.9%. The oil major said its plans concerning asset sales and debt reduction remain unchanged, and it still plans to maintain its dividend this year followed by a share buyback in 2017, as the company set out its plan following the acquisition of BG Group.

The major change was the increase in the amount of synergies that Shell expects to deliver from its GBP35.00 billion takeover of BG Group earlier this year, as Shell now expects to deliver USD4.50 billion worth of "deal-related synergies" in 2018 compared to the original target of USD3.50 billion.

Shell also plans to exit up to 10 countries where it currently operates as part of its asset sale programme that will run until 2018, whilst capital investment this year has been reduced by a further USD1.00 billion.

Shell shares also were benefiting from a rise in oil prices, with Brent crude reaching its highest level of the year so far. The North Sea benchmark touched a high of USD50.91 a barrel, and traded at USD50.82 at midday.

US benchmark West Texas Intermediate reached a high of USD49.99 a barrel, just short of its year high of USD50.18 made in May.

The UK Competition & Markets Authority said interdealer broker ICAP's sale of its voice-hybrid broking and information businesses to rival Tullett Prebon will face an in-depth investigation, but focused only on oil products broking.

The CMA said after considering the 20 overlapping product categories involved in the deal, the regulator believes all but one of these will result no realistic prospect of a substantial lessening of competition as a result of the deal.

However, the CMA said the merger does give rise to the prospect of a lessening of competition for the voice-hybrid broking of oil products, where competition from other brokers is more limited. There is also a lesser constraint on this market from electronic platforms and exchanges.

Tullett traded down 2.8% and ICAP was down 1.0%, both amongst the worst performers in the mid-cap FTSE 250 index.

esure Group traded up 1.6%, after the insurer said it has kicked off a strategic review of its GoCompare.com price comparison service, including a possible spin off, and has appointed a new CEO for the unit.

esure said it has re-invigorated the marketing strategy at GoCompare.com in the first year after it acquired the remaining 50% of the business it had not previously owned. It also has restructured the cost base and widened the product focus of the service. This has underpinned esure's guidance for GoCompare.com to deliver a 20% to 30% improvement in profit in 2016, the company said.

Mountfield Group, up 21%, was one of the best performers in the AIM All-Share index. The construction company said it made "significant progress" in 2015, swinging to profit after having transformed one of its businesses which had been to blame for a GBP3.9 million impairment in 2014.

Mountfield posted pretax profit of GBP177,177 for the year ended December 31, compared with the GBP3.9 million loss it reported the year earlier, after no impairment was incurred for 2015, compared to the GBP3.9 million impairment of goodwill in 2014.

Still ahead in the economic calendar, US nonfarm productivity and unit labour costs are at 1330 BST, and the Redbook index is due at 1355 BST, while the American Petroleum Association weekly crude oil stocks are at 2130 BST.

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

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