Britain's leading shares reversed earlier losses in late trade on Wednesday, as record US crude prices boosted heavyweight oil stocks and BAE Systems supported. The FTSE 100 ended 25.5 points or 0.4 percent higher at 6,306.2, after falling to 6,232.0 earlier in the session as credit fears pulled shares down.
Among individual stocks, BAE Systems gained 3.2 percent to top the index leaderboard after it entered into talks on a "sole source" basis with the US Department of Defence about supplying 10,000 medium-weight military trucks.
The department is looking for medium tactical vehicles designed to protect Army troops deployed in Iraq and Afghanistan from threats such as roadside bombs. The deal could be worth $4 billion, the Times newspaper reported.
Heavyweight oils were also buoyant after US crude hit a record $79 a barrel as a surprise large drop in US crude oil stocks was followed by a small output increase from Opec.
BP added 0.7 percent while rival Royal Dutch Shell climbed 1 percent. "What's driven it up is obviously Wall Street coming in," said Philip Isherwood, a strategist at Dresdner Kleinwort. "Wall Street came in weak and then has gone better. We did get some strength from the oil sector after the inventory data out of the US pushed the price to a new high."
"The credit thing is still ongoing," he added. "The fixation is with next Tuesday (Federal Reserve meeting on rates) - 50 basis points from the Fed (but) obviously if you get 25 instead that'll be a disappointment now." The lingering credit worries pulled a number of stocks down, with insurers suffering as Legal & General fell 2.3 percent.
Weaker base metal prices and the economic concerns weighed on mining shares, with Rio Tinto, Vedanta and Anglo American all down. Among individual decliners, ITV lost 1.5 percent after Britain's biggest commercial broadcaster pledged to restore growth by improving its programming, which it plans to fund by cost cuts and asset sales.
Further on the upside, Vodafone tacked on 1.9 percent as traders cited a positive telecoms note from J.P. Morgan. Next gained 2.2 percent after brokers issue positive notes on the clothing retailer, traders said. Home Retail rose 2.5 percent after the company, Britain's biggest household goods retailer, forecast good first half results as it gave an update for the second quarter.
But BHP Billiton, Diageo, Standard Life, Scottish & Newcastle, Capita Group and Rentokil Initial all fell after trading without the rights of dividend. "UK retail sales data tomorrow may offer further direction for the FTSE," said one trader. "Any suggestion that inflationary pressures continue to ebb may lend further support if consensus builds that the Bank of England will now hold steady on rates."
After the market closed, index compiler FTSE announced in its quarterly rejig that housebuilder Taylor Wimpey, mobile phone retailer Carphone Warehouse and Tullow Oil were joining the UK benchmark index. They replace property firm Segro, utility Kelda and power group Drax.
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