Britain's blue chip index reversed initial losses to rise more than 1 percent on Wednesday as commodities tracked energy and metal prices higher, while banks also rose as strong US data pushed stocks positive. The FTSE 100 ended up 57.4 points, or 1.1 percent at 5,528.1 after falling to 5,434.7 earlier in the session.
Across the Atlantic, US stocks rose to boost UK sentiment after data showed that new orders for long-lasting US manufactured goods jumped a surprising 1.3 percent in July on strong civilian aircraft sales, while a gauge of business investment also rose unexpectedly. The UK's benchmark share index is still down about 14 percent this year, however, on fears of a recession, concerns over rising commodity prices and the impact of a global credit crunch.
The FTSEurofirst 300 of top European shares was 0.2 percent higher. Among leading sectors, heavyweight oil shares were in demand as crude prices traded above $118 a barrel and after oil explorer Tullow Oil reported an almost 250 percent rise in first-half net profit, beating analysts' forecasts, thanks to high oil prices and the sale of a North Sea field. Tullow Oil added 3 percent.
Oil and gas services firm Petrofac also reported better-than-expected first-half net profit, up 57 percent from a year ago, and its shares rose 6.2 percent. BP, Royal Dutch Shell, BG Group and Cairn Energy put on 1.8 to 4.7 percent. "It's certainly been a profitable day for the FTSE with the London index retaking the 5,500 level and the petrochemicals sector accounting for over one-third of the gains," said Jimmy Yates, dealer at CMC Markets.
"Tullow Oil set the pace this morning with a solid set of earnings and crude has spent the day forging higher too, initially off the back of the threat posed by Hurricane Gustav - which has now been downgraded to a tropical storm." In miners, Antofagasta posted an 8.8 percent rise in first-half earnings per share, helped by higher copper output and prices which outweighed rising costs. Its stock was up 3.9 percent.
Rising metal prices also helped the mining sector, with Rio Tinto, BHP Billiton, ENRC and Xstrata climbing 1.3-4.2 percent. Also swimming in blue waters, UK banks turned positive with Barclays, HSBC Royal Bank of Scotland and HBOS gaining 0.2-2.8 percent. Housebuilder Taylor Wimpey lost 7.2 percent after the mid-cap firm reported a sharp fall in first-half profit and said it was scrapping its interim dividend due to challenging market conditions in Britain, the United States and Spain.
Other housebuilders also took a beating, with Persimmon, Bovis Homes and Barratt Developments slipping between 1.6 and 3.1 percent. Pharmaceuticals traded negative as traders said investors were switching from the sector, which has been the best performer in Europe so far this year. GlaxoSmithKline, Shire and AstraZeneca dipped 0.2-0.7 percent.
"We will see a market that bobs up and down like a cork in a bath for the next three months until we get close to the banks telling us 'we have quantified our losses, it's business as usual'," said David Buik at BGC Partners. Among individual stocks, Liberty International, Capita Group, InterContinental Hotels and Admiral Group fell after going ex-dividend.
Britain's second-biggest pubs group Enterprise Inns dipped 4.4 percent to top FTSE 100 losers, dragged down by a downgrade from Cazenove to "underperform" from "in-line". G4S, the world's biggest security and guarding firm by value, tacked on 5.9 percent as it met expectations with a 26-percent rise in first-half operating profit and said it remained confident for the full year.
"This month has seen the FTSE run out of steam ahead of the 5,550/70 area once already, and the temptation to book some profits on the back of the past week's gains could prove too tempting for traders as August draws to a close," said one strategist on the FTSE.
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