Uncertainty in markets as war looms

Signs that uncertainty over the situation in the Middle East was coming to an end sent shares in London surging into positive territory today.

After recovering from an initial 70 point fall this morning, confidence in the London market gathered momentum during the afternoon as share prices on both sides of the Atlantic surged upwards.

Indications that the US and UK were poised to start military action fuelled a strong performance on Wall Street, which saw the Dow Jones lift 181 points to 8041 by the time London’s market closed.

The FTSE 100 Index finished up 120.5 points at 3722.3.

The rally means share prices have gained 13% since their close last Wednesday.

After a difficult morning in which media stocks appeared particularly badly hit by fears of war on advertising revenues, only three stocks were still in negative territory by the close of trading.

Among them was supermarket chain Tesco, which slipped 2p to 171.5p, as doubts over its bid to buy rival William Morrison persisted.

Engineering products group Tomkins was also down 4.75p or 2.5% at 183p, and financial services group Man was off 2p at 900p.

But the rally undid losses in the media sector as WPP, which earlier eased 9.25p to 355.75p, closed up 5.5p at 370.5p, and FT-to-Penguin owner Pearson recovered from an 11p fall to close up 15p at 511p.

Expectations of war in the Gulf boosted oil share prices as Shell closed up 13p or 4% at 376p and BP rose 4% or 14.75p to 415p.

The surge also allowed under-pressure stocks to recover ground.

Aerospace group Rolls-Royce, which is to be relegated from the FTSE 100 after recent falls, was today’s second highest riser, up 10% or 7p at 76p.

Similarly British Airways soared 7% or 7.25p to 109.75p.

Elsewhere, banks and insurers pulled back earlier losses. Royal Bank of Scotland surged 59p at 1429, HBOS cheered 15p at 641, HSBC lifted 15p to 689p, Barclays improved 22.25p to 371.75p and Abbey National overturned early falls to close up 14p at 367.5p.

Of the insurers, Friends Provident changed direction to end the day up 2p at 75p. Royal & Sun Alliance rose 4.5p to 68p but the biggest gain in the insurance sector was for Norwich Union owner Aviva, which jumped 9% or 35.5p to 415p.

Outside the Footsie, Hit Entertainment was up 5%, or 9p, at 201.5p after revealing that children’s characters such as Bob the Builder and Thomas the Tank Engine, which it owns the rights to, had driven a 67% rise in interim pre-tax profits.

And beleaguered steel group Corus gained 45% – up 2.5p to 8p – after JP Morgan said it still had a reasonable chance of survival. The company’s share price went into freefall last week after failing to seal the sale of two aluminium businesses.

The biggest Footsie risers were Schroders NV up 45p at 485p, Rolls-Royce up 7p at 76p, Hays up 7.25p at 80.75p and AMVESCAP up 26.5p at 301.5p.

The only fallers were Tomkins down 4.75p at 183p, Tesco down 2p at 171.5p and Man Group down 2p at 900p.