London shares flattish, oil producers rise
FTSE 100 index up 0.2%; Holdings, HBOS, Lloyds TSB decline
LONDON (MarketWatch) - London shares edged higher on Wednesday, with oil producers and mineral extractors bolstering the top index.
Overall, the U.K. FTSE 100 index (UK:UKX: news , chart , profile ) rose 0.2% to 4,319.03 in a volatile session. Other European shares were flat-to-lower. See Europe Markets. See Indications.
Mineral extractors and oil producers provided a bit of support for the top index, with shares of BHP Billiton (BHP:
44.71, +0.39, +0.9%) (UK:BLT: news , chart , profile ) up 3.3%, Xstrata (UK:XTA: news , chart , profile ) shares up 3% and BP (BP:
49.36, +0.02, +0.0%) (UK:BP: news , chart , profile ) shares up 1.6%.
Gold and oil futures climbed, with light crude for January delivery rose 18 cents in electronic trading to $46.91 a barrel.
The Organization of the Petroleum Exporting Countries agreed Wednesday to cut oil production by 2 million barrels a day, said Saudi Arabian oil minister Ali al-Naimi according to a Dow Jones Newswires report. Naimi made his comments to reporters as a meeting of OPEC got underway, the report added.
Gold futures climbed $29.50 to $872.20 an ounce.
Still, HSBC Holdings (HBC:
8.05, +0.52, +6.9%) (UK:LLOY: news , chart , profile ) shares declined 1.5% in the banking sector.
Lloyds TSB was downgraded to sell from hold at Deutsche Bank, with the broker reducing earnings forecasts for higher bad debts, financial services compensation scheme costs and lost PPI revenue.
"[We] see the combined group as little better than break-even in 2009," they said.
French lender BNP Paribas (FR:013110: news , chart , profile ) warned late Tuesday that its investment banking arm had posted a loss for the first 11 months of the year and said it could shed around 800 workers in the division. See full story.
Federal Reserve cuts rates
Stocks had started the see-saw session in the green after the U.S. Federal Reserve slashed U.S. interest rates to just above zero after the European close on Tuesday and promised to try an array of new economic measures to stimulate spending. See full story.
The economic backdrop is just as gloomy in the U.K. with retailers recording a ninth consecutive month of falling year-on-year sales volume in December, according to the Confederation of British Industry.
Additionally, the number of persons claiming British jobless benefits rose by 75,700 in November, the Office for National Statistics reported Wednesday. The unemployment rate in the three months ending in October rose to 6%, up from 5.6% in the previous three months.
"Going forward, further Monetary Policy Committee easing is likely. We expect a 50 basis point cut at the January meeting, as a staging post on the way to the fuller consideration of the outlook at the February Inflation Report meeting. Unless financial conditions improve sharply for the February meeting, further easing -- and perhaps unconventional measures -- will be on the agenda at that stage," said Michael Saunders, economist at Citigroup.
Admiral (UK:ADM: news , chart , profile ) shares fell 3.1%.
UBS cut its stance on the firm to neutral from buy. The broker said that it continues to view the company's business as defensive, although it believes valuation at these levels feels full.
Retailer Sports Direct (UK:SPD: news , chart , profile ) rose 6.3% outside the top index..
Net profit for the 6 months to Oct. 28 jumped to 65.9 million pounds ($102.6 million) from 13 million pounds as revenue rose 2.9% to 687.7 million pounds. Excluding one-time gains, underlying earnings before interest, taxes, depreciation and amortization were up 7.4% at 89.8 million pounds.
The group said trading conditions continue to be challenging, but added it remains confident with its forecast for underlying earnings of 135 million pounds for fiscal 2009.
