Oil stocks led FTSE rebound

London equities staged a turn-around and reversed early losses in early afternoon as oil stocks surged ahead after crude oil price hit a record-high.
The FTSE 100 was 0.7 per cent higher at 6,349.1, a gain of 42.7 points. However, the FTSE 250 remained in the red, falling 0.5 per cent, or 57.3 points to 11,162.4 as mid-cap investment companies continued to fall amid tense credit conditions.

Oil continued to trade within touching distance of the $80 per barrel mark. Nymex October West Texas Intermediate fell 17 cents to $79.74 after hitting a record $80.18 a barrel in the previous session.

Oil stocks rallied at mid-session and helped protect the market from steeper losses. Royal Dutch Shell extended earlier gains, jumping 1.3 per cent to £20.26. BP rose 1 per cent to 573p, while Cairn Energy was up 0.9 per cent at £19.03.

Other resource stocks also found support due to bullish commodity prices. Lonmin put on 2.4 per cent to £33.84 whilst Anglo American rose 2.5 per cent to £28.87. Antofagasta rose 1.7 per cent to 709½p, Kazakhmys jumped 1.6 per cent to £13.38, and Rio Tinto was 1.3 per cent firmer at £37.13.

But the biggest single riser of the day was Cable & Wireless, 4.1 per cent at 174p, after Cazenove upgraded its rating on the stock to "outperform" from "in-line".

Financial stocks continued their torrid run on lingering uncertainty about the health of global credit markets. There were also mixed expectations at the action central banks might take to address the ongoing crisis.

The Bank of England offered an additional £4.4bn in cash to commercial banks on Thursday morning, in an effort to normalise the money markets. In offering an additional 25 per cent extra cash in return for high-quality assets, the Bank hopes to flood the market with sterling and bring overnight interest rates back down towards the official rate of 5.75 per cent.

Banks and financial stocks, however, continued to trade lower as the lingering credit squeeze once more unnerved investors. Northern Rock, the high street bank most exposed to the wholesale credit markets to raise funds for lending, lost 3.7 per cent to 647p. Fellow mortgage lender Alliance & Leicester fell 2.6 per cent to 938½p.

Elsewhere, Icap dropped 0.8 per cent to 480p, Royal Bank of Scotland eased 0.7 per cent to 537½p and Barclays (NYSE:BCS) lost 0.3 per cent to 606½p.

Scottish & Newcastle was the biggest faller among blue chips, losing 0.7 per cent to 610p after fading hopes for a bid from Carlsberg prompted Merrill Lynch to cut its rating on the stock to "neutral" from "buy".

ITV shed 2.8 per cent to 108p after Goldman Sachs removed the commercial broadcaster from its "conviction buy list". ITV suffered a 6 per cent fall in net advertising revenue at its core commercial channel during the previous session.BAE SystemsLondon Stock Exchange shelved plans
Source:FT.com