September 12, 2018 / 10:19 AM / 9 days ago

Oil and tobacco give FTSE a boost

MILAN (Reuters) - Stronger crude prices and a rally in tobacco stocks gave a boost to Britain’s top share index on Wednesday, while a profit warning hit energy provider SSE.

People walk past the entrance of the London Stock Exchange in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls

The FTSE 100 ended up 0.55 percent at 7,313.36 points, having hit its lowest point in five months in the previous session.

The internationally-exposed index has lost ground in recent weeks as the pound strengthened, on the back of growing optimism over a Brexit deal, and worries over trade and emerging markets kept investors wary.

However, sterling saw some weakness on Wednesday on reports of a potential challenge to Prime Minister Theresa May.

BP and Shell rose 1.6 percent and 1 percent respectively, after Brent prices reached $80 following a larger-than-expected drop in U.S. crude inventories and as sanctions on Iran added to concerns over global oil supply.

SSE tumbled 8.3 percent to its lowest since February 2011 after it warned first-half profit would halve due to the impact of dry, still and warm weather, and persistently high gas prices.

“It is very rare to see a profit warning from a utility company as they are meant to have fairly predictable income streams ... Ultimately it is a good reminder that even seemingly defensive companies still have operational and regulatory risks,” said Russ Mould, investment director at AJ Bell.

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo

The SSE warning weighed on other utilities.

Tobacco stocks were in focus after the U.S. Food and Drug Administration said it was considering a ban on flavoured e-cigarettes in response to an “epidemic” of young people using them.

After the news, BAT and Imperial Brands turned higher to end up 5.8 and 3.2 percent respectively.

The FDA’s leader announced a number of steps the agency planned to take as part of a broader crackdown on the sale and marketing of e-cigarettes to kids.

Traders said the action was not as harsh as feared.

Among mid-caps, furniture retailer Dunelm Group reported flat annual profits after taking an 8.9 million pound charge in its efforts to complete the integration of loss-making internet business Worldstores. Its shares rose 11.8 percent.

“With forecasts held, stable trading, an acceleration in store openings to 10 stores for the year ahead, a reasonable showing from the new CEO may well yield some positive momentum in the share price,” said Peel Hunt analysts.

Construction company Galliford Try rose 10.5 percent after its full-year pretax profit jumped 145 percent. It also confirmed its 2021 strategic targets.

Reporting by Danilo Masoni; Editing by Alexander Smith and Mark Potter

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