BP shares rose by 8% today despite the oil giant’s announcement that it will axe dividend payments for the first time since the Second World War.
The group, which has seen its shares halve in value since April, will scrap shareholder payments relating to the first three quarters of 2010 and has also agreed to set up a 20 billion dollar compensation fund.
Shares rose 25.8p to 362.8p, helping the FTSE 100 Index to gain 40.3 points to 5278.3, as analysts said the moves by BP should cool the political heat on the company and provide a degree of comfort to markets after weeks of uncertainty following the Gulf of Mexico oil rig disaster.
Joshua Raymond, market strategist at City Index, said: “This firmly draws a line under the near term uncertainty, but the medium to long term outlook for BP remains rather clouded, with damage to brand reputation, legal challenges and regulatory affects still unknown.”
BP’s improvement meant the top flight index was on course to extend its recent rally to a seventh straight session.
UK retail sales, which outperformed market expectations for May with a 0.6% rise, lifted sentiment and ensured strong buying of sterling on hopes of better conditions on the UK high street. The pound rose nearly 1% against the dollar at 1.482 and also improved against the euro.
Banking stocks, which have benefited from the improved market sentiment, rose again as Lloyds Banking Group lifted 2.5p to 58.1p and Royal Bank of Scotland cheered 2.1p to 47.2p. Barclays added 10.1p to 314.95p as Exane analyst Ian Gordon said UK banks should feel “cautiously relieved” by the tone and content of Chancellor George Osborne’s speech to the City last night.
Outside the top flight, shares in Game Group continued to struggle after it said like for like sales fell 12.3% in the 19 weeks to June 12 and would stay in the red for the rest of the year. With the highly-cyclical sector in a trough due to the absence of major console releases, shares fell 5.25p to 83p.
And design and engineering firm WS Atkins fell 28p to 698p after full-year profits fell 6% and it painted a cautious outlook due to uncertainty caused by public spending cuts. Results were ahead of expectations but with broker KBC Peel Hunt downgrading the stock to hold shares fell 4%.