FTSE climbs to highest level in two and half years

The FTSE 100 Index rose to its highest level for two-and-a-half-years today amid market rumours of a bid from Royal Dutch Shell for rival BP.

Heavily-weighted BP rose 3% as traders cited vague speculation of Shell’s interest in its closest competitor.

The talk added to cheer over positive retail data from the US to send the FTSE 100 Index up 30.5 points to 5891.2, its highest point since June 2008.

The FTSE 100 index had been sluggish in early trading, but was lifted when the US Commerce Department said retail sales rose 0.8% last month, beating expectations that they would rise by 0.5%.

Wall Street’s Dow Jones Industrial Average was up 0.6% following the news, which also strengthened the dollar and saw the pound fall to 1.58 dollars.

The pound also slumped against the euro to 1.18 following strong industrial data from Germany.

In the UK, oil giant BP climbed 3% – or 14.8p to 473.1p – on the potential Shell bid interest rumours, although there was no comment from either firm.

Shell rose 28.5p to 2081.5p.

BP shares were also supported after it entered into an agreement to sell almost all of its exploration and production assets in Pakistan to United Energy Group. The asset sale will help the group pay for the clean up of its disaster in the Gulf of Mexico.

The oil sector was helped further by an upbeat note from broker Credit Suisse.

But Whitbread was suffering a less cheery session, topping the fallers board after revealing a strong performance from coffee shop chain Costa was offset by a deterioration in sales trends at the company’s Beefeater and Brewers Fayre restaurants business.

Despite posting figures in line with expectations, the Costa and Premier Inn owner dropped 3% or 50p to 1740p.

It was also another strong day of trading for the FTSE 250 Index which set a fresh three year high.

Second tier transport stock Go-Ahead climbed 7p to 1280p after it said procurement savings in its rail business meant it was running marginally ahead of profit expectations.

Investors were also reassured by an update from Wickes owner Travis Perkins, which lifted 25.5p to 997.5p after exceeding analyst forecasts with a 6.5% increase in group revenues.

In the FTSE 250 Index, flooring firm Carpetright fell 14p to 782p after it reported a 28% drop in half-year profits to £10m (€11.7m) and said it did not expect a pick-up in trading conditions in 2011.

Shares fell even though analysts said today’s interim results were in line with market expectations.

Meanwhile, gambling firm Betfair continued its poor run of form on the stock market after it revealed revenues would be hit by the big freeze.

In its first set of results as a public-listed company, Betfair said cancelled race meetings in the current quarter would moderate growth rates, despite a strong overall trend led by its core sport of football.

The firm’s shares fell 191p to 990p – and have now declined by more than 30% since it floated on the stock market in October.

The top Footsie risers were BP up 14.8p at 473.1p, Serco Group ahead 12p at 577.5p, BAE Systems up 7p at 337.5p and AstraZeneca up 55.5p at 3107p.

The top Footsie fallers were Whitbread down 50p at 1740p, Pearson off 18p at 998p, Admiral down 21p at 1535p and Royal Bank of Scotland down 0.5p at 41.3p.

Ends