BP defies expectations with 7% rise

LONDON FTSE 100 CLOSE 5,253.89 +15.97

SHARES in BP rose by 7 per cent yesterday despite the oil giant's decision to axe dividend payments for the first time since the Second World War.

As US politicians began grilling chief executive Tony Hayward over the Gulf of Mexico oil spill, shares closed 22.7p higher at 359.7p. The rally came as markets bet that axing the dividend and setting up a $20 billion (13.5bn) compensation fund should ease the political pressure on the firm.

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The heavyweight's push higher helped the FTSE 100 Index gain 15.97 points to 5,253.89 as the top flight enjoyed its seventh straight day of gains.

Wall Street's Dow Jones Industrial Average was lower at the time of London's close after a bigger than expected rise in initial jobless claims last week, although there was better economic news on the home front.

Jimmy Yates, head of equities at CMC Markets, said: "The jobs data was a blow for the commodities and BP flattered gains on the upside but the market has had a pretty good week, so there's some nice profits being banked before the investors rev up again for another push."

UK retail sales, which outperformed market expectations for May with a 0.6 per cent rise, lifted sentiment and ensured strong buying of sterling on hopes of better high street conditions.

The pound rose nearly 1 per cent against the dollar at $1.481 while it was also slightly higher against the euro.

Retailers were stronger after the data, with Marks & Spencer up 3.3p to 345p and Home Retail Group, which owns Argos and Homebase, up 0.7p to 232.4p as the stock looked to recover after a recent run of falls.

Among retail stocks in the FTSE 250 index, Debenhams rose 1.5p to 60.3p and Sports Direct International lifted 3.2p to 107.5p but shares in Game Group continued to struggle after it said like-for-like sales fell 12.3 per cent in the 19 weeks to 12 June and would stay in the red for the rest of the year.

With the highly-cyclical sector in a trough due to the absence of major console releases, shares fell 6 per cent or 4.9p to 83.35p.

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Back in the top flight, banking stocks, which have benefited from the improved market sentiment, rose again as Lloyds Banking Group lifted 1.6p to 57.2p and Royal Bank of Scotland cheered 1.5p to 46.7p.

Barclays added 7.8p to 312.65p as Exane analyst Ian Gordon said UK banks should feel "cautiously relieved" by the tone and content of Chancellor George Osborne's speech to the City on Wednesday night.

Design and engineering firm WS Atkins fell 30.5p to 695.5p in the second tier after full-year profits declined 6 per cent and it painted a cautious outlook due to uncertainty caused by public-spending cuts.

Elsewhere in the second tier, shares in Stagecoach rose 4.6p to 190.8p after a franchise contract dispute with the Department for Transport, worth up to 100 million, was won by its South West Trains franchise.

Aggreko shed 15p to close at 1,455p despite analysts at Seymour Pierce initiating coverage of the Glasgow-based temporary power supplier with an "out-perform" rating.

Engineering firm Weir Group was up 2.4 per cent, or 26p, at 1,128p after hosting a seminar for investors and analysts..