Britain's FTSE 100 spiked to a fresh 26-month record on Tuesday, with oil shares in the ascendant on the eve of a major strategy presentation by oil company Shell and Tesco leading the pack.
The British-based supermarket chain rose 3.5 percent as it smashed forecasts with a 24 percent rise in first-half pre-tax profit that shot a ray of hope through the gloom surrounding consumer-oriented companies as investors come to terms with the potential for declines in high-street spending.
The FTSE closed up 28.9 points, or 0.6 percent, at 4,608.4, its highest closing level in over two years, and just below its intraday best at 4,615.9
Oil shares added 13 points to the FTSE and Shell led the sector with a 2.3 percent rise. It accelerated to its highest level in more than a year in anticipation of a strategy presentation by the oil major's new management due on Wednesday, essentially its first since the company admitted it had overstated its oil reserves.
"In many ways, it's not so much what they say as how they say it," said Tim Rees, director of investment strategy at Insight Investment, the asset management arm of HBOS.
"What are they looking for? Confidence, saying the right things," a dealer agreed. "There is nothing I'd hang my hat on."
Oil shares got a fresh boost from crude oil futures in New York, which cleared the $47 mark on Tuesday afternoon as Chinese imports remained strong and traders worried that Hurricane Ivan had caused a drawdown in US petroleum reserves.
In addition, BP, up 1.8 percent to a fresh two-year high, likely got a boost from continued buybacks as the share traded on heavy volume, dealers said.
"They bought 10 million shares yesterday after a month's absence and they probably did something like that today," one said.
Metal shares were also strong as commodity prices rose. BHP Billiton led with a 2.1 percent gain.
Tesco drew a sharp contrast with Marks & Spencer, whose shares fell 1.2 percent after it reported like for like sales down more than 6 percent in the past 10 weeks compared to the same period a year ago.
Marks & Spencer, which rejected a bid offer estimated at 400 pence per share and is struggling to show shareholders it can provide superior returns, priced a buyback at 332p-380p, which disappointed many investors.
Caution reigned in consumer stocks.
Boots chemists led the losers, down 2.4 percent. Reckitt Benckiser, maker of household cleaners, declined 1.6 percent, still suffering the after effects of Monday's profit warnings from Unilever and Colgate-Palmolive, even though Reckitt itself confirmed its outlook.
Broadcaster ITV fell 1.8 percent as Numis Securities said the sector looked ripe for profit-taking. ITV rose around 14 percent in the past month.
Emap, however, rose 1.6 percent, recovering from a small decline on Monday when analysts said a merger of Capital Radi and GWR was likely to spur consolidation of radio stations, and possibly hasten an Emap take-over of Scottish Radio Holdings.
LogicaCMG, which fell 4 percent after being downgraded to "underperform" by Credit Suisse First Boston, was among the weak points in the midcap index, which posted a decline. On the FTSE 100, Sage Group was off 1.3 percent on low volume. Declines in UK tech shares mirrored a lower US tech sector after PalmOne gave a weak outlook.