Buoyant BP boosts FTSE 100, but gains seen brittle

By Simon Falush

LONDON (BestGrowthStock) – A jump in the share price of BP (BP.L: ) on hopes that the Gulf of Mexico oil leak will soon be capped outweighed a weakness in miners to push Britain’s FTSE 100 (.FTSE: ) share index higher for a fifth session on Monday.

The index closed up 34.08 points, or 0.7 percent, at 5,167.02 having last week gained 6.1 percent — its biggest weekly percentage rise in a year.

But the index is still down 11.3 percent since April when investor fears about euro zone debt and a double-dip recession began to worry investors and technical analysts cautioned that there was plenty of scope for more weakness.

“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,” said Phil Roberts, chief European technical strategist at Barclays.

Volumes are still low, he said, indicating that many people could be waiting for the market to retreat again before returning to equities.

Only around 50 percent of the last 90 trading days were transacted on Monday.

BP gained 9.4 percent and added 34 points to the index — its entire gain for the day — after it said it expects to attach a new containment cap on the Macondo wellhead later on Monday that should more than triple the amount of leaking oil being collected.

Elsewhere, Cobham (COB.L: ) added 2.5 percent as BofA Merrill Lynch upgraded its rating on the stock to a “buy” from “neutral,” with an unchanged 270 pence price target, in a review of the European Aerospace & Defense sector.

HEADWINDS

But overall the outlook for the UK economy looked beset by headwinds.

Bank of England policymaker Adam Posen said that Britain was at risk of returning to recession, in part because of looming fiscal austerity and problems in the euro zone, according to an interview published on Monday.

Meanwhile Standard & Poor’s affirmed Britain’s AAA long-term debt rating on Monday but kept a negative outlook, saying that the government’s debt burden may prove inconsistent with the top rating.

Britain’s economy grew at the same pace as previously estimated in the first three months of this year, but the recession that preceded it was deeper than previously thought, the Office for National Statistics said.

Many investors were on the sidelines ahead of the start of the quarterly results reporting season in the United States, which starts with Alcoa (AA.N: ) after the bell on Monday.

Inflation numbers from the UK, Europe and the United States due for release over the course of the week and a raft of data from China were also expected to attract attention.

Mining stocks were out of favor, falling back after a strong advance in the previous session, after the world’s top metals consumer China reported a drop in copper imports for the third straight month in June.

Kazakhmys (KAZ.L: ), Rio Tinto (RIO.L: ) and Lonmin (LMI.L: ) were the worst off, shedding 1.6 percent to 2.9 percent.

(Editing by Greg Mahlich)

Buoyant BP boosts FTSE 100, but gains seen brittle