BP bargain hunt helps buoy the City

LONDON FTSE 100 CLOSE 5,163.7 +31.2

A BIG rise for BP shares as bargain-hunters piled into the beleaguered oil giant ensured the London market overcame weak Wall Street trading yesterday.

The heavyweight stock closed 7 per cent higher, reversing heavy losses in the previous session and generating a large slice of the improvement in the FTSE 100 Index, which closed 0.6 per cent higher, up 31.2 points to 5,163.7.

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This was despite the US Dow Jones Industrial Average falling into the red following news that retail sales dropped by an unexpected 1.2 per cent last month, wiping out much of the enthusiasm over the American economy seen overnight.

The London market started on the front foot as a surge in China's export figures and Thursday's report showing a drop in US jobless claims boosted oil prices to about $74 a barrel, helping energy stocks across the board.

But in currency news, the pound suffered following weaker-than-expected UK industrial output data, falling by around 1 per cent to $1.46 and 1.20 .

The main focus of the session was on BP as investors speculated that the recent falls in the share price had presented buying opportunities, despite the threat to future dividend payments.

It is thought that BP is seeking a deal with the White House that could see the investor payouts held in "escrow" – or deferred – until the group's clean-up liabilities are clearer.

Anthony Grech, head of research at IG Index, said: "Many seem to be taking the view that the recent steep losses were an overdone knee jerk reaction to the political rhetoric, and bore little relation to the perceived value of BP."

The UK firm, which has fallen by more than 40 per cent since the oil-rig explosion in the Gulf of Mexico, led a recovery for energy stocks as Royal Dutch Shell rose 30p to 1714p and Tullow Oil lifted 41p to 1162p.

Elsewhere, shares in Home Retail Group showed signs of recovery after falling on Thursday in the wake of a worse than expected trading update from its Argos catalogue business.

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Citigroup reacted to the disappointing update by cutting its target price on the stock, but shares were still 5.4p higher at 233.7p.

The fallers board was dominated by banking stocks, with Lloyds Banking Group down 1.6p to 54.3p and Royal Bank of Scotland off 0.8p to 42.4p.

In a quiet session for corporate news, attention was focused on the reinsurance sector after Brit Insurance's disclosure on Thursday that it had turned down a takeover approach from a private equity bidder worth 10 a share.

The Lloyd's of London insurer, which sponsors the England cricket team, rose 21 per cent or 150.5p to 879.5p, while others in the sector to benefit included Catlin, with a gain of 20.6p to 347p.

The biggest Footsie risers were BP, up 26.4p at 391.9p, Cable & Wireless, ahead 3.85p at 88.85p, Tullow Oil, up 41p at 1162p, and BT Group, ahead 4.1p at 135.9p.

The biggest fallers were Aggreko, down 58p at 1415p, Lloyds Banking Group, off 1.6p at 54.3p, Prudential, down 14.5p at 535p, and Standard Chartered, off 33.5p at 1615.5p.