Tullow Oil deal helps fuel surge

LONDON FTSE 100 CLOSE 5,137.98 +113.65

OIL firms surged yesterday on rising commodity prices, while talk of deal-making boosted Britain's largest explorer.

Tullow Oil was among the biggest gainers in the FTSE 100, on reports that Exxon Mobil had bought a stake in the Jubilee field in Ghana from its partner, Kosmos Energy.

There have been claims the stake could have been sold for up to $5 billion (3.1bn), a level above the value ascribed by the market to Tullow's stake in the multi-billion barrel field. The London-based company's shares rose 94p or 8.4 per cent to 1,209p.

Cairn Energy, Scotland's largest explorer, was also in demand, rising 138p to a 13-month high of 2,828p.

Commodity-related shares and banks helped the FTSE 100 index rise more than 2 per cent yesterday, closing 113.65 points higher at 5,137.98. Jimmy Yates, head of equities at CMC Markets, said that while the session had been "bumper", the market would need further good news if the rises of recent months were to continue.

"Many will now be looking for a positive earnings season to help the FTSE continue its strong performance until the end of the year," he said.

Mining companies were responsible for much of the rise, as metal prices firmed. Gold hit a record high of $1,035.95 an ounce, fuelled by dollar weakness. This boosted gold miner Randgold Resources, which rose 337p, more than 8 per cent, to 4,531p.

Base metals were also higher, helping the entire sector. Silver mining firm Fresnillo topped the index, up more than 10 per cent to 824.5p. Rio Tinto rose 176.5p to 2,740.5p as it signed an investment agreement with the government of Mongolia for the development of a copper-gold complex.

Banks were firmer, helped by supportive comments from analysts at Morgan Stanley, which raised its ratings on a number of UK companies. The sector was also helped by news that French bank Socit Gnrale had decided to raise 4bn to repay government loans. Royal Bank of Scotland, which is mulling a cash call of its own, rose 1.29p to 49.85p. Lloyds Banking Group, which is also part-owned by the government, climbed 1.54p to 96.5p while Barclays cheered 8.1p to 369.9p.

Retailers were flat as supermarket giant Tesco reported interim results slightly ahead of market expectations, although analysts said its growth was "sluggish". Tesco shares dipped 0.7p to 390.7p, while Morrisons eased 3.2p to 275.1p. Sainsbury's, which is due to issue a trading update this morning, climbed 0.3p to 322.9p.

RSA Insurance gave back some of Monday's strong gains, dipping 0.8p to 132.4p.

Pharmaceutical group Shire was the biggest faller in the top flight, easing 18p at 1,053p.

In the FTSE 250, Aberdeen Asset Management shares eased 2.1p to 145.8p, on news that Toscafund had cut its stake to less than 5 per cent.

The London-based hedge fund, chaired by Sir George Mathewson, owned more than a quarter of AAM at one point, but has cut its holding as shares in Britain's largest independent fund manager rallied.

Marks & Spencer supplier Northern Foods was the biggest faller in the mid-caps after it warned that margins in its chilled foods division were under pressure. While the firm said it remained track to meet expectations for the year, shares in the Fox's biscuits firm declined 6 per cent or 4.25p to 67p.

Wolfson Microelectronics, which fell sharply on Monday's sales warning, recovered strongly yesterday, closing up 4.9 per cent at 128.5p.