City in black as BP reversal outweighs losses on Wall St

The heavyweight stock closed 7 per cent higher, up 26.4p at 391.9p reversing heavy losses seen in the previous session and managing to generate a large slice of the improvement in the FTSE 100 Index, which closed 0.6 per cent higher, up 31.18 points to 5163.68.

This was despite America's Dow Jones Industrial Average falling into the red following the news that retail sales dropped by an unexpected 1.2 per cent last month, wiping out much of the enthusiasm over the US economy that was seen overnight.

The drop in the retail figures was the first for eight months, when most economists had forecast for a gain of 0.2 percent. The poor showing underlined concerns about consumers' diposable income as the economy recovers.

The only bright news for the US was in the technology sector, where stocks rose on expectations that semiconductor companies are seeing demand hold-up better than expected after a poor showing in 2009.

The London market started on the front foot as a surge in China's

export figures and Thursday's report showing a drop in US jobless

claims boosted oil prices to around $74 a barrel, helping energy stocks across the board.

But in currency news, the pound suffered following weaker-than-expected UK industrial output data, falling by around 1 per cent to $1.46 and 1.20 euros.

The main focus of the session however was on BP as investors speculated that the recent declines in the share price had presented buying opportunities, despite the threat to future dividend payments.

It is thought that BP is seeking a deal with the White House that could see the investor payouts held in "escrow" – or deferred – until the group's clean-up liabilities are clearer.

Anthony Grech, head of research at IG Index, said: "Many seem to be taking the view that the recent steep losses were an overdone knee jerk reaction to the political rhetoric, and bore little relation to the perceived value of BP."

The UK firm, which has seen its value fall by more than 40 per cent since the oil rig explosion in the Gulf of Mexico, led a recovery for energy stocks as Royal Dutch Shell rose 30p to 1714p and Tullow Oil lifted 41p to 1162p.

Elsewhere, shares in Home Retail Group showed signs of recovery after falling on Thursday in the wake of a worse than expected trading update from its Argos catalogue business.

Citigroup reacted to the disappointing update by cutting its target price on the stock, but shares were still 5.4p higher to stand at 233.7p.

The fallers board was dominated by banking stocks, with Lloyds Banking Group down 1.6p to 54.3p and Royal Bank of Scotland off 0.8p to 42.4p.

In a quiet session for corporate news, attention was focused on the reinsurance sector after Brit Insurance's disclosure during Thursday's session that it had turned down a takeover approach from a private equity bidder worth 10 a share.

The Lloyd's of London insurer, which sponsors the England cricket team, rose 20 per cent or 151p to 880p, while others in the sector to benefit included Catlin with a gain of 20.6p to 347p.

The biggest Footsie risers were BP up 26.4p at 391.9p, Cable & Wireless ahead 3.85p at 88.85p, Tullow Oil up 41p at 1162p and BT Group ahead 4.1p at 135.9p.

The biggest faller of the session was Aggreko, which finished 58p lower at 1415p.