FTSE 100 heads for seventh advancing session backed by BP and banks

The UK’s blue-chip index has posted gains for the seventh successive session this morning, backed by BP (LON:BP) shares which have proved popular in early trading following the confirmation yesterday that the group will front up a $20bn clean-up fund to cover the cost of the Gulf of Mexico oil spill.

Rob Hull
shareprices.com - Thursday, June 17, 2010

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BP shares have soared after the group confimed an oil-spill fund

The under-fire oil company, summoned to the White House yesterday by President Barack Obama, has said it will suspend its dividend payout to shareholders for the first three quarters of the year to help fund the $20bn pot of money that’s set to be paid out to businesses and individuals seeking compensation for damages caused by the oil that’s spewing into the Gulf of Mexico.

Despite the predicted dividend cut being a bitter pill for those holding BP stock, the shares have been in demand as new investors look to jump on the low prices with predictions the British-based oil giant’s shares aren’t going to lose much more ground now a financial package to cover the spill costs has been announced.

BP’s share price gained over six per cent by the time the market opened this morning and is currently 26 points higher at 10:00BST with a gain of 7.8 per cent.

More good news for BP is that an additional containment system began operating yesterday. The second system links up with the lower marine riser package cap system and should reduce the amount of oil and gas leaking from the damaged Deepwater Horizons rig’s damaged blow out preventer.

Also helping the FTSE’s seventh successive day of positive movement is the banking sector, spearheaded by four per cent gains for RBS (LON:RBS).

Royal Bank of Scotland confirmed it will be disposing of its units in Pakistan and the United Arab Emirates with the Kazakhstan business also set to be sold off.

Stephen Hester, CEO of RBS, said the deal to sell the non-core assets could make the part-nationalised bank £250bn.

Investors reacted positively off the back of the news, along with the sector being buoyed yesterday by the successful auction of eurozone government bonds and George Osborne scrapping the Financial Services Authority, sending the share price in the firm up by over 4.5 per cent at 10:15BST.

Chancellor Osborne announced yesterday that the financial industry’s regulatory body was to be merged with the Bank of England.

The Chancellor said the Financial Services Authority, set up by Gordon Brown to monitor overly-risky investment by banks, failed to control banks and had a responsibility for the recession.

Fellow banking stocks Lloyds Banking Group (LON:LLOY) and Barclays (LON:BARC) follow RBS in close pursuit with the pair up by four per cent and 3.5 per cent respectively. HSBC (LON:HSBA) is also gaining with a 10p increase and a rise in excess of 1.5 per cent.

The biggest losers were miners with Fresnillo (LON:FRES) leading the FTSE 100 fallers charts with a share price decrease of 3.7 per cent at 10:30BST.

Miners were down after benefitting strongly from the recent rallies, an improving global economic outlook and an ongoing battle against the 40 per cent supertax that’s set to be placed on them in Australia.

Three of the largest British-based miners have joined forces with BHP Bilton (LON:BLT), Xstrata (LON:XTA) and Rio Tinto (LON:RIO) issuing a joint statement complaining that there has been no government movement on the tax.

The joint statement said: “During the meeting the companies outlined three fundamental areas of concern with the RSPT [Resource Super Profit Tax] - ensuring the RSPT is not applied retrospectively, so existing projects where investment decisions have already been made are not affected; the need for an effective tax rate that retains Australia's international competitiveness as an investment destination; and stability arrangements for taxes and royalties for existing and new projects.”

“At present there is no formal acknowledgment from government that these key issues will be addressed.”

The FTSE 100 index is at 5281.69 at 10:32BST – a gain of 0.84 per cent and 44 points.

 

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