LONDON MARKET OPEN: Stocks Track Oil Gains As OPEC Officials To Meet

LONDON (Alliance News) - UK stocks opened higher Tuesday following gains in oil prices as top officials from Saudi Arabia, Russia and other members of the Organization of the Petroleum Exporting Countries prepared to meet in Doha.

Oil prices rose overnight as a number of media outlets reported that oil officials from Saudi Arabia, Russia and several other key members from OPEC will meet on Tuesday for their highest-level discussion in months, a possible sign that producers are at last preparing to tackle a devastating supply glut.

According to sources, news agency Reuters said the talks in Doha will involve Saudi Oil Minister Ali al-Naimi and his Russian counterpart Alexander Novak, two figures who must reach an accord for any coordinated global action to hold any hope of success.

They will be joined by Venezuela's Oil Minister Eulogio Del Pino, who has in recent weeks been visiting major oil producers to rally support for the idea of "freezing" production at current levels in an effort to halt a downward spiral in prices.

"Assuming these reports are accurate, it would appear that there was actually some substance to suggestions by the UAE energy minister last week that OPEC is open to discussing cuts, which given the number of false claims prior to this, actually comes as a surprise," said Craig Erlam, senior market analyst at Oanda.

However, the analyst pointed out there are a number of hurdles to overcome before a deal can be made, in particular the ambitions of Iraq and Iran which both want to increase production to gain market share. Furthermore, Erlam said a cut in production by the OPEC members and Russia would likely offer an advantage to US shale producers.

Nevertheless, the potential for production cuts sparked a rebound in both Brent crude and West Texas Intermediate just after the London equity market open on Tuesday. Brent oil was quoted at USD35.12 a barrel, having traded at USD33.57 a barrel at the London stock market close on Monday. WTI was quoted at USD30.90 a barrel just before the open on Tuesday.

In the FTSE 100, oil major BP traded up 3.8% and peer Royal Dutch Shell's 'B' sharesup 2.9%.

The FTSE 100 was up 0.7% at 5,863.72 points, the FTSE 250 up 0.5% at 15,803.98 and the AIM All-Share flat at 671.71.

In Europe, the French CAC 40 was up 0.7% and the German DAX 30 was up 0.4%.

Asian stocks closed higher, with the Nikkei 225 index in Tokyo ending up 0.2%, the Hang Seng in Hong Kong up 1.1% and the Shanghai Composite up 3.3%.

Anglo American leapt to the top of the FTSE 100 gainers, but slipped back shortly after. The multi-commodity miner reported 2015 earnings that beat analyst expectations despite sharp declines, as the company stepped up its restructuring programme in an attempt to adjust the business to cope with low commodity prices.

Anglo saw a 55% fall in underlying earnings before interest and tax to USD2.23 billion from USD4.93 billion in 2014. However that was considerably higher than the USD2.00 billion expected by analysts.

Underlying earnings fell at a steeper rate, dropping 63% to USD827.0 million from USD2.21 billion a year ago, as revenue declined 26% to USD23.00 billion from USD30.98 billion. Underlying Ebitda was down 38% in 2015 to USD4.85 billion from USD7.83 billion, a touch above analyst expectations.

In early trade, Anglo traded up 1.1%.

In the FTSE 250, Spectris was the best performer, up 6.3%. The precision instrumentation and controls supplier said restructuring costs and higher spending pushed its profit lower in 2015, exacerbating the mixed trading conditions in its markets as it was hit by a slowdown in the US manufacturing industry.

The company, which makes materials analysis and testing and measurement systems used by industrial and manufacturing industry customers, said its pretax profit dipped to GBP141.6 million in the year, down 17% from the GBP171.1 million it made a year earlier.

Revenue rose to GBP1.19 billion from GBP1.17 billion, but this was wiped out at the profit line by increased research and development spending and restructuring costs as the group looked to reduce expenses.

However, Spectris said it expects an improvement in performance in 2016 as the benefits of its restructuring programme, which is on track, flow through, following a year hit by mixed conditions across its markets and divisions.

BGEO Group said it has increased its dividend payout after reporting a solid set of results in 2015 that showed a material rise in revenue and profit.

BGEO, the holding company of JSC Bank of Georgia, reported an 30% lift in pretax profit in 2015 to GEL359.4 million from GEL276.6 million a year earlier after revenue soared 39% to GEL861.6 million from GEL621.2 million.

Earnings before interest, tax, depreciation and amortisation rose by more than 50% in 2015 to GEL546.8 million from GEL364.2 million.

As a result of the solid performance in 2015, BGEO raised its annual dividend for the year by 14% to GEL2.4 per share, which will be converted and paid in pounds and sits comfortably within the company's payout ratio target of 25% to 40%, it said.

BGEO was up 4.5% in early trade.

Pendragon traded up 2.4%, as the car seller said its pretax profit for the full year was up from the previous year, driven by strong demand for used vehicles, as well as investment in its retail facilities.

The FTSE 250-listed group said its pretax profit for the year to the end of December rose to GBP79.0 million from GBP64.6 million.

Pendragon said this comes on the back of a 11% increase in like-for-like gross profit for used vehicles, of GBP15.0 million, as well as a 12% increase in like-for-like gross profit of new vehicles, to GBP17.5 million.

Topping the economic calendar Tuesday, UK inflation readings are at 0930 GMT. ZEW economic sentiment surveys for Germany and the eurozone are at 1000 GMT, the New York empire state manufacturing index is at 1330 GMT, and the US National Association of Home Builders' housing market index is at 1500 GMT.

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

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