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FTSE level, BP gains on Royal Dutch Shell bid talk

Published 12/14/2010, 07:29 AM
Updated 12/14/2010, 07:32 AM

* FTSE flat as investors focus on U.S. Fed announcement

* Energy shares strong, BP boosted by bid talk

* Whitbread sheds 3.2 percent after results

By David Brett

LONDON, Dec 14 (Reuters) - Gains in energy stocks offset falling miners, leaving Britain's top share index almost level on Tuesday, with BP the top riser on vague market talk of bid interest from Royal Dutch Shell.

By 1156 GMT the FTSE 100 was 1.15 points higher at 5,861.90 in light trade, after rising 0.8 percent on Monday to its highest close since Nov. 9.

"We saw some good gains yesterday but investors seem content with the index hovering near its year-high (5,902.11) and little in the way of drivers to push us on today," Jimmy Yates, head of equities at CMC Markets, said.

BP rose 2.3 percent, with traders citing talk of potential bid interest from Royal Dutch Shell. Both companies chose not to comment.

The oil major was also helped by a bullish note from Credit Suisse, which raised its forecasts for oil prices in 2011 and reiterated that BP is its top pick in the sector.

BP said it had agreed to sell a portfolio of oil and gas assets in Pakistan for $775 million, higher than analyst estimates, as it raises cash to pay for the Gulf of Mexico oil spill.

Energy shares were the main support on London's blue-chip index, aided by a rise in crude prices that was sparked by data on Monday highlighting China's continued growth.

Bunzl climbed 1.4 percent after Numis raised the stock to "buy" from "add", after the packaging distributor reported full-year results.

EYES ON FED

Traders kept money on the sidelines ahead of a U.S. Federal Reserve Open Market Committee announcement.

Analysts expect the Fed to remain in a holding pattern as officials evaluate the recent launch of a second round of quantitative easing.

"Any indication that there is going to be more caution from the Fed could send a little wave through equity markets, but I think this is unlikely and everybody's hoping there will be no shocks between now and next week," said Giles Watts, head of equities at City Index.

Wall Street futures pointed to a flat open on Tuesday, with U.S. economic data including November retail sales and producer prices due at 1330 GMT, and October business inventories at 1500 GMT.

In the UK, consumer price inflation rose unexpectedly to a six-month high of 3.3 percent in November.

Miners were the biggest drag on the FTSE with Lonmin down 1.8 percent.

Whitbread was the heaviest blue-chip faller, down 3.2 percent despite strong profit growth this financial year, as Panmure Gordon downgraded it to "hold" from "buy", saying it does not expect consensus expectations to be raised.

TUI Travel fell 1.3 percent, with traders citing valuation grounds after parent company TUI AG reported full-year results.

Aviva shed 1.1 percent after UBS started coverage of the insurer with a "neutral" rating and 400 pence target. (Editing by David Hulmes)

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