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Investors give cool reaction to oil supply freeze

Oil majors still rise and Weir Group gets boost from vague bid chatter
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Four big producers agreed to hold output at January levels if others joined in

London shares made limited gains on Tuesday as investors gave a mixed reaction to a move by oil producers to freeze, rather than cut, output.

The FTSE 100 Index climbed 15.69 points to 5839 after four of the world's biggest producers agreed to hold output at January levels if others joined in.

But it wasn't the cut that many had hoped for, leaving oil prices losing early upward momentum.

Brent crude stood 0.1% up at US$33.4 a barrel and US light crude fell back below the US$30 level with a 0.8% dip to US$29.5.

Investors in oil majors still made the most of it, with BP (LON:BP.) up 6.4p, or 1.9%, to 339.2p and the enlarged Royal Dutch Shell (LON:RDSB) spurting 25p, or 1.6%, to 1565.5p.

In economics, UK CPI inflation picked up to a year-high of 0.3% year-on-year in January from 0.2% in December, matching consensus. But economists said a Bank of England interest rate hike in 2016 remained unlikely.

Anglo American (LON:AAL) pared some its losses to stand 17.8p, or 4.5%, off at 375.25p after reporting a 55% fall in profits and announcing a sale of non-core businesses.

After a 14.5p rally on Monday said to have been sparked by vague takeover rumours, Harvester and Toby Carvery owner Mitchells & Butlers (LON:MAB) receded 4.8p to 269.7p.

But oil services company Weir Group (LON:WEIR) also continued its ascent, again on the back of purported idle bid chatter, rising by 13p to 911p after closing at 791.5p on Thursday.

There has been market speculation about potential consolidation in oil service companies following the fall in the oil price, which has forced oil majors to cut investment in projects and plant.

Hargreaves Services (LON:HSP) tumbled 35.12p, or nearly 15%, to 202.75p on news of an 82% drop in pre-tax profit and an 83% cut in its dividend amid tough coal and steel markets.

Tungsten miner Premier African Minerals (LON:PREM) revealed Darwin has opted to convert £210,00 of its loan notes into company shares. The stock was flat at 0.38p.

Berkeley Energia (BKY) ticked up 0.25p to 22.5p as rigs started turning on Zona 7 of its Salamanca uranium project in western Spain, kicking off a major exploration programme.

Investors took a shine to Stellar Diamonds (LON:STEL) after the miner told investors a third sale of stones from trial mining at the Baoulé kimberlite project in Guinea will take place next month.

News that the Alpala deposit at the Cascabel copper project in Ecuador can be extended southeast boosted shares in Solgold (LON:SOLG) by 0.18p to 2.05p.

LONDON OPEN

Talk of talks over the global oil supply glut gave a slicker look to London shares on Tuesday, continuing Monday's rally.

The FTSE 100 Index climbed 16.77 points to 5841 on reports of high-level discussions between Russia, Saudi Arabia and other Opec members, sparking hopes that they will freeze or cut the flow of oil into the market.

Brent crude rose 2.6% to US$34.3 a barrel and US light crude bounced back above the US$30 level with a 1.4% jump to US$30.15.

Investors in oil majors took heart, with BP (LON:BP.) up 6.6p, or 2%, to 339.4p and the enlarged Royal Dutch Shell (LON:RDSB) spurting 32p, or 2.1%, to 1572.5p.

Brenda Kelly at London Capital Group said: "Apparently, oil below $30 a barrel is weighing significantly, even on most competitive producers’ finances.

"It appears oil producers are keen to collaborate to prevent the oil market from further decline and even the most stubborn, Saudi Arabia, is giving up on its sanguine fight for more market share."

Anglo American (LON:AAL) fell 26.6p to 366.45p after reporting a 55% fall in profits and announcing a sale of non-core businesses.

After a 14.5p rally on Monday said to have been sparked by vague takeover rumours, Harvester and Toby Carvery owner Mitchells & Butlers (LON:MAB) receded 1.8p to 272.7p.

Oil services company Weir Group (LON:WEIR) also continued its ascent, again on the back of purported idle bid chatter, rising by 10p to 908p after closing at 791.5p on Thursday.

There has been market speculation about potential consolidation in oil service companies following the fall in the oil price, which has forced oil majors to cut investment in projects and plant.

Hargreaves Services (LON:HSP) tumbled 30.88p, or nearly 13%, to 207p on news of an 82% drop in pre-tax profit and an 83% cut in its dividend amid tough coal and steel markets.

Tungsten miner Premier African Minerals (LON:PREM) revealed Darwin has opted to convert £210,00 of its loan notes into company shares, knocking the stock by 0.02p to 0.35p.

Berkeley Energia (BKY) ticked up 0.25p to 22.5p as rigs started turning on Zona 7 of its Salamanca uranium project in western Spain, kicking off a major exploration programme.

MARKET PREVIEW

The FTSE 100 is set to build on the gains made over the last two trading session when it opens later.

The spread betters are predicting it will rise 26 points to 5,850.28 on open, adding to the momentum that has seen the index of blue-chip stocks advance almost 300 points since the start of play Friday.

Yesterday’s rebound was aided by comments from European Central Bank president Mario Draghi that hinted at further support for Europe’s lacklustre economy.

China also had a massive impact on sentiment as it resumed trade after the lunar new year lay-off in subdued mood, eschewing the volatility that has been its hallmark.

This and some soothing comments from the central bank in support of the yuan made for an all too rare day of gains.

Overnight in Asia the mood was positive with the Shanghai Composite up 2.4%, the Hang Seng in Hong Kong ahead 1.3% and Japan’s Nikkei 225 nudging up 0.2% (after a stupendous 7% rise on Monday).

Here in the UK the big number to look for is actually a rather small one. Economists reckon cost price inflation will move 0.1 percentage points to 0.3% when the data is reported later.

The retail price index, on which pay rises are based, is set to advance to 1.4% from 1.2%, according to CMC Markets.

The big corporate news will be provided by Anglo American which delivers annual results later that will reveal in all its gory detail the rather fragile state of the commodities market.

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