BP recovery helps FTSE rise continue

LONDON FTSE 100 CLOSE 5,167.02 +34.08

A NEAR 10 per cent jump for embattled BP helped the FTSE 100 index notch up its fifth positive session in a row yesterday.

The blue chip oil giant jumped to its highest level for more than a month amid takeover talk and encouraging progress on capping the Gulf of Mexico spill.

BP's advance drove a 0.7 per cent gain on London's Footsie, which closed up 34.08 points at 5,167.02, having last week gained 6.1 per cent, its biggest weekly percentage rise in a year. But the index is still down 11.3 per cent since April when investor fears about eurozone debt and a double-dip recession began to worry investors and technical analysts cautioned that there was plenty of scope for more weakness.

Phil Roberts, chief European technical strategist at Barclays, said: "The 200-day moving average is at 5,322 and unless we move above that level then there's still the worry that we are in a corrective phase of an ongoing downtrend."

It was a poor day for the pound as sterling slumped against the dollar after rating agency Standard & Poor's gave a negative outlook for the UK, despite reaffirming its AAA long-term rating.

The pound fell 0.4 per cent to $1.50 on the news. S&P's blow followed the latest gross domestic product figures, which showed growth unchanged at 0.3 per cent in the first quarter of 2010 - but there was some disquiet over a worse than expected collapse in exports as well as news that the recession was deeper than first estimated, with a 6.4 per cent decline.

Among stocks, BP was the star performer with a rise of 34.2p to 399p after weekend reports suggested ExxonMobil - already the world's biggest oil company - had sought White House approval for possible takeover plans to a create a 265 billion giant.

BP said that its latest efforts to contain the spill were on track with a new more efficient collection cap, although it has cost the firm $3.5bn (2.3bn) since the crisis began 84 days ago.

BT shares lost some of the gains seen before the weekend after it reached a deal with union leaders for an "unprecedented" three-year pay rise worth more than 9 per cent. Shares were 1.3p lower at 138.7p.

Outside the top flight, shares in construction group Kier were 3 per cent higher, up 32p to 975p, after it flagged full-year profits at the top end of market hopes. The firm said it had secured high volumes of work and added that mothballed commercial projects were being resurrected.

Shares in Domino's Pizza failed to hold on to an initial gain seen after it posted a better-than-expected 28 per cent rise in half-year profits to 17.5 million.

Like-for-like sales were up 17.2 per cent in the second quarter, but analysts focused on tougher prospects for the second half as shares dropped 6p to 397p.

It was a mixed session for Perth-based transport group Stagecoach due to a contrasting assessment of its prospects from two City brokers.

JP Morgan Cazenove upgraded the stock on the hope of a significant return of capital to shareholders, but Royal Bank of Scotland Equities was more cautious and downgraded the group to "sell" from "hold" on fears over Stagecoach's exposure to UK government spending cuts will come into focus.