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FTSE 100 ends in suspended animation above 6,900 after OPEC deal

Last updated: 17:29 29 Sep 2016 BST, First published: 12:07 29 Sep 2016 BST

OPEC

London’s blue-chip FTSE 100 ticker closed above 6,900 on Thursday thanks to a deal to curb oil supply but after the break higher at the opening it just held those levels to the end of the day.

The FTSE 100 closed up 1%, or 70 points, at 6,919. It was the highest close since August 15 and last closed above 6,900 on Friday, Sept 23.

Put in that context, the gains were not that dramatic, but then the OPEC deal is also fraught with some doubts.

Members of the Organization of Petroleum Exporting Countries said they had proposed cutting their collective output to between 32.5mln and 33mln barrels a day, down from August levels of 33.2mln barrels a day. The group, however, deferred the task of completing a plan to make those cuts until November.

Some pundits see that as realistic, others as a delaying tactic that could unwind the deal.

Oil and mining firms dominated the list of winners, with Royal Dutch Shell (LON:RDSB) “B” shares advancing to the top of the table with a 6.7% gain to 2022p and its (LON:RDSA) “A” shares in second place with a 6.6% rise to 1924.5p.

The third and fourth spots belonged to miners BHP Billiton plc (LON:BLT) up 6.5% at 1168p and Anglo American (LON:AAL) up 6.1% to 980.1p.

Beyond that the top league followers were oil group BP (LON:BP.), miner Rio Tinto (LON:RIO), energy group Centrica (LON:CNA) and copper miner Antofagasta Holdings (LON:ANTO).

Outsourcing firm Capita (LON:CPI) slumped 26.7% to 698p and the worst performer not only among blue-chips but also overall in the London market, after it said profits would be hit by one-off costs of up to £25mln, because it was late to implement new IT systems for London's congestion charge.

The second-biggest faller on the index was Alton Towers owner Merlin Entertainments (LON:MERL), which slid 5.9% to 442.1p after reporting that visitor numbers at the theme park were still recovering. A crash on the Smiler rollercoaster in June 2015 injured 16 people.

The mid-cap FTSE 250 index was up 0.4% to 17,864 and led higher by energy stocks Tullow Oil (LON:TLW) up 9.8% to 240.1p and Riverstone Energy (LON:RSE) up 8.8% to 1170p.

The FTSE AIM 100 Index ended up 0.4% at 3928 and the FTSE AIM All-Share Index up 0.3% to 820 - its highest level since May 30, 2014.

Some 35% of London stocks gained, 29% declined and 35% were unchanged.

He overall highest gainer in London was Urals Energy (LON:UEN) up 32% to 3.125p after reporting a healthy first half profit. The biggest laggard was Capita.


Midsession

The top-share index opened sharply higher and then spent the rest of the morning hovering around the 6,920 level.

Investors chased the Footsie upwards after oil cartel Opec opened the door (a fraction) to the possibility of a cut in oil output levels when it holds its policy meeting at the end of next month.

The FTSE 100 index was up 69 points at 6,918 at noon, with resource stocks doing much of the heavy lifting.

Russ Mould, investment director at AJ Bell, made the point that a rise in the oil price is good news for Royal Dutch Shell and BP as it reduces the chances of a either of these big dividend payers cutting shareholder pay-outs – although it is worth noting Shell has not cut its dividend in seven decades.

“The FTSE 100 is forecast to yield around 3.8% in 2016 and 4.0% in 2017 but one lingering concern is that earnings cover of those dividends at 1.5 times this year and 1.7 times next year is well below the 2.0 times comfort zone,” Mould observed.

“This is at least partly because two of the biggest dividend payers- Shell and BP – offer [earnings] cover of barely 0.5 times in 2016 and 1.0 for 2017,” he added.

“Less well developed, pure-play producers like FTSE 250 firms Cairn and Tullow could also benefit, but the operational and exploration risks are higher here, and then the riskiest oil plays are the AIM-quoted junior explorers, which may not even be producing or have a find, but whose share prices could welcome more positive sentiment toward their industry,” Mould suggested.

Elsewhere in the resource sector, Edenville Energy PLC (LON:EDL) powered 0.07p higher to 0,49p after raising £500,000. The company, which is developing a coal-to-power project in Tanzania, placed shares at 0.4p a pop.

ASA Resource Group PLC (LON:ASA), the company once known as Mwana Africa, climbed 14% to 2.15p as it told investors that the reorganisation of its subsidiaries is “taking shape”.

The company is separating its gold, nickel, diamond and copper operations into separate entities to “unlock significant value” for its shareholders.

Continuing with the Africa focus, security services provider Westminster Group PLC (LON:WSG), which was hit hard by the Ebola crisis, looks to have put the dark days behind it.

Passenger volumes at the African airports that use Westminster’s services have still not recovered to pre-Ebola crisis levels, but the airport security business has now been profitable since the start of March 2015 and was a key factor in the headline operating loss diminishing dramatically to £0.18mln from £1.10mln in the first half of last year.

Westminster’s shares shot up 14%.

David Richards, chief executive officer of “big data” software specialist WANdisco PLC (LON:WAND), might be feeling a bit chastened after the company’s shares rose 15% on news he will be stepping down.

The board room change comes one day after the company announced the appointment of US-based chief financial officer Erik Miller.


Open

For the first time in eight years, the oil cartel Opec has provisionally agreed to cut production, lighting a fire under global share prices.

Unsurprisingly, resource stocks responded most positively to the news, with Royal Dutch Shell PLC (LON:RDSB) topping the Footsie leader board with a 5.7% rise on the ‘B’ shares.

Sector peer BP PLC (LON:BP.) put on 4.6%, as investors saluted the decision of Opec to “show willing”, even if, as a number of pundits have observed, the fine details – including which countries would cut production, and by how much – have yet to be thrashed out, and a lot could change before the cuts are ratified in the cartel's meeting at the end of November.

Miners were also on the rise, with BHP Billiton PLC (LON:BLT), which has substantial oil interests, the pick of the bunch, up 4.9%.

Driven by demand for resource shares the FTSE 100 was up 82 points at 6,931, despite support services giant Capita PLC (LON:CPI) plummeting more than 28% after a profit warning.

By comparison, the downbeat trading update from theme parks operator Merlin Entertainments PLC (LON:MERL) was a veritable bag of laughs.

Like-for-like revenue in the 38 weeks to September 17 rose 1.3% from a year earlier but the group warned that city centre attractions, such as hoary old tourist trap Madame Tussauds, were having a tough time of it, as tourists become antsy over potential terrorist attacks.

In the small cap space Strat Aero PLC (LON:AERO) soared 68% to 1.18p as it settled its legal dispute with Hulsey Smith, the former chairman and chief executive of its subsidiary Aero Kinetics.

The airborne drones maker will give Smith an 11.8% stake in the company plus US$75,000, and has dropped all allegations of fraud against him.

Patagonia Gold PLC (LON:PGD) was the next best performing UK stock, surging 22% to 2.625p, as it saw a US$10mln turnaround from losses into a profit of US$3.6mln in the six months to June as production jumped by 70% to 16,900 ounces while cash costs almost halved to US$591 per oz.

Life Science Developments Limited (LON:LIFE) was wanted as it said it was continuing to explore acquisitions that fit with its new-found biotech focus.

The shares are due to be suspended from trading on October 6 unless the company can find a home for some of its cash, and investors dived in, pushing the shares up 0.375p to 2.375p as executive chairman Mitchell Allan told investors to await an update ahead of that date.


Opening snapshot at 8.15am

The FTSE 100 opened 68 points or 1% higher at 6,917.    

The top winner was BHP Billiton (LON:BLT) up over 5% to 1,154.5p, following a surge over on the Australian Securities Exchange.

Merlin Entertainments (LON:MERL) down 4.5% to 449p. The theme park operator released a trading update this morning, after it was fined £5mln for last year's Smiler roller-coaster crash which injured sixteen people. 


Preview at 6.57am

London’s FTSE 100 is ready to add around 1%, boosted by better oil prices after OPEC agreed to cut production.

After much speculation and conjecture it was revealed on Wednesday night that the oil producers’ cartel had agreed on measures that will see crude output capped between 32.5mln and 33mln barrels per day.

It is the first time OPEC has intervened to reduce volumes for eight years, albeit August’s OPEC production measured 33.3mln so the reduction is slight.

Crude prices rallied more than 5%, with Brent trading at around US$48.70 and West Texas Intermediary crude changing hands at US$47.12.

Oil prices are expected to remain volatile however.

“Oil prices rallied strongly given the low expectations of any form of deal; however, it remains likely that further upside may be difficult, if for all the talk, the detail is found wanting,” said Michael Heston, analyst at CMC Markets.

“This is because the final details have yet to be agreed and the Iranian oil minister said that Iran would’t have to freeze production, which means other members will. A committee has been set up to deal with that and is likely to be a tall order if history is any guide.

“Ultimately the proof of the pudding will be in the eating and if history is any judge, the detail will fall short.”

Wall Street closed Wednesday on a positive note. The Dow Jones gained 110 points, 0.6%, at 18,339. The S&P 500 meanwhile added 0.53% to 2,171 whereas the NASA climbed 0.24% to finish the session at 5,318.

In Asia, Japan’s Nikkei rose 1.7% to 16,745. Hong Kong’s Hang Sen notched 0.18% higher to 23,660, elsewhere the Shanghai Composite moved up 0.45% to just over 3,000.

Australia’s ASX 200 climbed more than 1% to 5,468.

Here in London, the FTSE 100 is seen nearly 70 points higher with IG Markets calling the blue-chip benchmark at 6,908 to 6,912 about an hour before the start of the trading day.

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