FTSE 100 close: Factory prices fall boosts shares

 

Recent falls in the price of crude oil have put related stocks under pressure, dragging down indices. Today was no different.

A city dealer sitting at his desk

Market watcher: Shares are expected to retreat once again.

Energy giants BP, down 3.75p at 461.5p, and Royal Dutch Shell, off 15p at 1,437p, were under pressure after the price of oil slipped below $60 a barrel.

The sector was also feeling the heat of a warning from US oil giant Chevron overnight that its earnings would be hit by a sharp decline in refining margins.

Exploration company Tullow Oil was down 11p at 849p while Cairn Energy was 28p lower at 2,070p.

The FTSE 100 may have closed 13 points up yesterday, breaking a three-day losing streak, but it was back in the red today closing 31.5 points down at 4,127.2.

The market, however, was helped by economic data. It emerged at 9.30am that prices at British factor gates fell in June at their sharpest annual rate since 2001, faster than expected, while the prices those producers are paying for raw goods declined at their fastest rate since 1997.

The data eased inflation fears which therefore pushes back any prospect of an increase in the bank rate. Any increase in borrowing costs could kill any nascent recovery, hence the instant fillip to shares this morning.

The mood was also helped by bullish notes from brokers Cazenove and Goldman Sachs sounded a resolutely cheerful note. Cazenove believes the FTSE 100 is trading 'well below the bottom of the potential trading range' of 4500 to 5500 and sees 'considerable upside' in both cyclicals and defensives. It and says telecoms and tobacco stocks, plus utilities, retailers, housebuilders and oil producers could move about 20% higher.

Goldman Sachs is positive on better credit markets, lower costs from job cuts and sounder valuations. Its top picks include pharmaceutical group Shire, down 12p at 825p, engineer Babcock, down 6.25p at 463.75p, and Game Group, up 1.75p at 138p.

Company news was dictating share moves in the mining sector. Anglo American's efforts to fend off an unwanted merger approach were boosted today with the appointment of a respected City figure as its new chairman. Sir John Parker, who is also chairman of National Grid, will take on the role from August 1, succeeding Sir Mark Moody-Stuart who is retiring from the board of the mining giant after seven years as chairman.

Anglo American shares were up 3.5p to 1,654.50p. Rio Tinto was down 65.5p at 1,901.5p. It also emerged that Australian packaging group Amcor was still in discussions with Rio Tinto to buy parts of its packaging assets. Xstrata shares were off 12.8p at 597p.

Mining shares over the past month

Lloyds Banking Group's boss Eric Daniels will be sidelined under plans to parachute an all-powerful chairman into the state-controlled bank, the Daily Mail and This is Money revealed today. The government is thought to be pushing for a City heavyweight to replace current chairman Sir Victor Blank, who has been ousted following last year's ill-fated takeover of HBOS. Lloyds shares were up in early trading but closed static at 63.3p.

There was a relatively steady flow of company updates for a Friday. Roofing and insulation firm SIG, steady at 88p, said sales were substantially lower in the UK after it missed out on the usual seasonal pick-up in activity. Like-for-like sales slumped 22% in the first six months of the year.

Bovis' trading statement was the latest housebuilder to give a reflection of the state of the property market. And it joined the queue to suggest the market had stabilised. In fact, Bovis, down 6p at 389p, went further: 'With improved home affordability and growing consumer confidence, homebuyer activity will in time increase creating an improvement in demand for the group's homes.'

The company said its focus on driving volume 'more assertively' meant that it had seen a 92% increase in net reservations for private homes in the six months since January 1, compared to the previous year.

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