Commodity stock gains lift City to new 18-month high

The London market had been lacklustre for much of the day, although oil prices hit an eight-week high above 82 dollars a barrel, helping commodity stocks and leaving the Footsie 38.27 points up at a fresh 18-month high of 5640.57.

While Wall Street's Dow Jones Industrial Average was virtually unmoved in early trading, it was gloomy UK manufacturing figures which captured attention for much of the day in the currency markets.

The 0.9 per cent fall in output during January made little impact on shares but sparked another sell-off of the pound.

Sterling was trading below 1.49 against the dollar at one point and slipped below 1.10 against the euro as markets fretted over more evidence of the UK's fragile recovery from recession.

Several merger and acquisition deals in the US overshadowed an unexpected drop in January wholesale inventories.

Total wholesale inventories slipped 0.2 per cent, versus expectations of an increase of 0.2 per cent, while sales rose to their highest level since October 2008.

Abbott Laboratories agreed to buy Facet Biotech Corp for $27 a share late on Tuesday, topping a failed bid from Biogen Idec. Facet surged 66 per cent to $26.95.

The largely uninspiring session for shares came a day after the Footsie marked the anniversary of the lows seen during the financial crisis, having bounced back by 60 per cent in the past 12 months.

A smaller than expected rise in US oil stocks pushed up crude prices and helped index heavyweights Royal Dutch Shell and BP move ahead 201/2p to 1845p and 51/4p to 6247/8p respectively.

In a slow session for major corporate news, Standard Life's announcement that it had beaten City forecasts with operating profits of 919m for 2009 gave the stock a boost, up 41/8p to 2081/4p.

Elsewhere in the financial sector, part-nationalised players Royal Bank of Scotland and Lloyds Banking Group added 13/8p to 403/8p and 21/8p to 551/4p respectively.

Insurer Prudential improved 15p to 5341/2p as it continues to claw back ground lost after news of its record rights issue to finance the mammoth deal to buy AIG's Asian business.

Barclays also fought back from an early slide after newspaper reports said it was working on plans to buy a large retail bank in the United States. Shares added 2p to 3477/8p.

The fallers' board was littered with blue chip stocks which turned ex-dividend, meaning that new investors will not gain the next dividend payout.

This hit British American Tobacco, down 711/2p to 2235p and tour operator TUI Travel, off 53/8p to 2771/4p.

Outside the top flight, housebuilders were the subject of trader rumours, with talk suggesting Barratt Development was being eyed for takeover by Charles Church rival Persimmon.

Barratt shares jumped almost 6 per cent as a result, ahead 61/2p to close at 1217/8p.

The FTSE 250's top riser was inter-dealer broker Tullett Prebon, which added 793/4p to 390p, or 26 per cent, after confirming preliminary offer talks.

Car dealership Inchcape fell more than 4 per cent after it said it expected market conditions to remain challenging this year. Profits for 2009 fell by less than expected, but shares nonetheless slid 11/4p to 281/4p.

The biggest Footsie risers were Icap up 153/4p to 3703/8p, Petrofac ahead 47p to 1162p and Lloyds.