TUESDAY MARKET CLOSE: Mega-merger gossip boosts oil duo

Rumours that Shell may be mulling a bid for arch rival BP gave both stocks a much-needed bounce and helped the FTSE 100 recoup its most recent losses.

BP was up nearly 5 per cent at 433.85p and Shell added more than 4 per cent. Picture: Getty

Most analysts took the latest talk of the long-muted tie-up between two of London’s biggest firms with a pinch of salt.

Chris Beauchamp, market analyst at IG, said: “Such a merger would be a brave move at a time of heightened uncertainty – those who suggest it must know that they would either be labelled as geniuses or madmen depending on the eventual result.”

But with oil stocks starting to look oversold on recent crude price weakness, BP was up nearly 5 per cent at 433.85p and Shell added more than 4 per cent to 2,208p. Stabilising commodity prices also helped Tullow Oil – one of the worst casualties of the recent oil price crash. It added 6 per cent at 424.7p.

With a concrete deal between insurers Aviva and Friends Life also helping sentiment, the FTSE 100 added 85.73 points at 6,742.1. Friends climbed 8.9p at 375.1p but Aviva lost early gains to close just 0.6p higher at 500p.

Sainsbury’s shares jumped 4 per cent – up 9.4p at 241.2p – as Citigroup issued a positive broker note with a price target of 300p. Analyst Pradeep Pratti said the chain was gaining on its competitors in terms of price, but with lower oil prices boosting the sector Tesco and Morrisons were also higher, up 3.5p to 187.3p and 6.2p to 182.9p respectively.

Royal Mail was the biggest faller in the top flight after regulator Ofcom said it won’t impose regulations on competitors.

Chief executive Moya Green had complained that Royal Mail’s universal service puts it at a disadvantage against competitors who cherry pick the prime delivery areas to operate.

The shares were 3 per cent lower at 405.5p.