The UK's top share index fell for a second day on Tuesday, although a rise in oil prices lifted energy stocks and a broker upgrade gave support to British American Tobacco. Britain's blue chip FTSE 100 index fell 0.2 percent to 7,285.74 points, weighed down by financials, while mid caps slipped 0.3 percent on sharp, results-driven falls. The broader oil & gas index, which has lost around 4 percent so far this year, added 0.5 percent as Brent crude touched its highest level in more than two years, before easing back on profit taking.
Shares in Royal Dutch Shell rose around 0.8 percent, while Tullow Oil added 1.3 percent. Oil firms have been hit hard this year by stubbornly low oil prices and concerns around developments in electric cars and cleaner fuels. "There are indeed the beginnings of the effect that these oil supply changes were meant to bring about, they're finally starting to feed through," Ken Odeluga, market analyst at City Index, said.
"Oil companies have made huge progress in terms of cost cuts, efficiency, deleveraging, but on the other hand we've had a really anaemic oil price trend," Odeluga added. British American Tobacco rose 1.4 percent, reversing earlier losses, helped by a an upgrade to outperform from analysts at Cowen and Company. Following the US Food and Drug Administration's surprise announcement in late July that it was contemplating new rules around nicotine content, BAT shares have fallen 13 percent.
"We view current levels as appropriate to begin building a position," said Cowen and Company. British mid caps saw some sizeable moves following results, with shares in Card Factory, AA and Close Brothers registering falls of between 6.4 percent and 18.3 percent. British greeting cards retailer Card Factory saw its first-half profit drop 14 percent and flagged the impact from a fall in the pound and rising wage costs.
A warning about a more competitive environment weighed on lender Close Brothers, which also cited Brexit as a source of uncertainty. In AA's case, a plan to ramp-up capex spending sent its shares lower, despite its results slightly beating expectations. "We remain concerned that the business cannot generate sufficient cash flow to satisfy both debt and equity holders," analysts at Jefferies said in a note.
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