London back on form

London shares returned to winning form today after a share buyback bonanza at Cable & Wireless drew investors back to the market.

Shares in C&W surged 6% higher in anticipation that £250m (€357.7m) will be spent on buying back one-tenth of the company’s shares.

With oil prices softening and a clutch of other blue-chip stocks racking up gains of more than 2%, the FTSE 100 Index closed 16.8 points higher at 4734.5.

The mood was also helped by a key Bank of England inflation report which appeared to ease fears that interest rates will rise again soon.

The Bank said house price growth had slowed more quickly than expected and consumers were starting to tighten their budgets, although risks remained that could force inflation to miss its 2% target in two years’ time.

One of these risks was oil prices which hit record levels in September, but declined as low as $43.5 for a barrel of Brent crude today.

This was its lowest level in seven weeks and came as the International Energy Agency suggested the price of crude had passed its peak.

The news helped oil-dependent stocks such as chemicals group ICI to rise 3%, up 7.5p to 224.75p, while British Airways was 3.5p higher at 225.75p.

They stood behind Cable & Wireless on the risers board as analysts looked beyond its lacklustre half-year results to focus instead on further restructuring plans and the share buyback programme. The London-based group shot up 7p to 116.5p.

Elsewhere in the sector, Vodafone was 2p lower at 137.75p on the day that chief executive Arun Sarin launched the group’s 3G services and spoke of “a new era in mobile communications”.

Mining stocks were another major contributor as upbeat comments about Chinese demand for raw materials buoyed the sector.

Antofagasta advanced nearly 4% – up 40p to 1082p, while Rio Tinto added 49p to 1528p and Anglo American rose 33p to 1263p.

Associated British Foods advanced half a penny to 715p as it hailed a year of “substantial progress” after discount chain Primark lifted profits 23% and other brands performed well.

On the downside, Scottish Power slumped more than 6% after warning its US division PacifiCorp would miss targets for the full year. The fall in shares - down 26.25p to 404.75p – came despite strong growth in the UK.

Outside the top flight, food producer Dairy Crest lifted 15p to 376p as it unveiled a 10% rise in first half profits.

And logistics group Christian Salvesen moved a penny higher to 62.5p after it said it had lured a former senior executive back from a rival in order to become chief executive.

But high street retailer Peacock was in negative territory, 3p lower at 258p, after saying it was on course to open 100 stores during this financial year.

The day’s biggest Footsie risers were Cable & Wireless, up 7p to 116.5p, Antofagasta lifting 40p to 1082p, ICI gaining 7.5p to 224.75p and Compass strengthening 8p to 245.75p.

The biggest fallers were Scottish Power, off 26.25p to 404.75p, BG Group down 9p at 347p, Man Group losing 23p to 1303p and Scottish & Southern Energy weakening 13.5p to 808p.