London's FTSE 100 closes higher after BP's strong earnings report

The FTSE 100 index on London Stock Exchange gained on Tuesday after oil giant BP reported strong earnings in 2022.

The index, which tracks the U.K.'s 100 top companies by market capitalization, rose 0.36 percent or 28 points to 7,864.71. FTSE 100 started the week by closing lower despite a rally on Friday.

As the biggest gainer of the index, BP surged by more than seven percent, with its share price rising to the highest point in over two years. BP posted a higher-than-expected annual profit. The company also announced that it would pass $4.4 billion to shareholders in a full-year dividend.

CMC Markets U.K. chief market analyst Michael Hewson said that the skyrocketing energy prices boost earnings for oil companies like BP and Shell. However, Hewson noted that BP had slowed its plans to reduce its oil and gas production. The company earlier pledged to reduce production by 40 percent by 2030 but later revised the plan to a 25 percent decrease.

"While this is likely to be criticized by climate campaigners, it is a welcome move given that a too fast a push towards renewables won't get the support it needs, if it ends up pushing people into fuel poverty," Hewson said.

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"Shell shares are also seeing decent gains on the back of these numbers as well as a rebound in oil prices."

Meanwhile, shares of luxury wallpaper and textiles company Sanderson Design Group plummeted by 7.6 percent after reporting a sharp drop in profits following its exit from the Russian market. On the other hand, Auction Technology Group shares surged by almost ten percent after securing a $40 million deal with American second-hand selling platform

Airtel Africa, BT Group, Shell and GSK followed BP as the biggest gainers in the FTSE 100. Meanwhile, Pearson, Melrose Industries, Compass Group, Rentokil and Scottish Mortgage Investment Trust concluded the trading session in the red.

FTSE 100 outperformed other European stock markets, which concluded the trading session with mixed results. Europe's Stoxx 600 index closed higher by gaining 0.2 percent. However, Germany's Dax fell by 0.16 percent, and the French Cac 40 slipped by 0.07 percent during closing.

Domestic-leaning FTSE 250 was the biggest loser, dropping over one percent amid news of Rishi Sunak's cabinet reshuffling.

“It’s been a mixed session for markets in Europe with the FTSE 100 outperforming due to a strong performance from the oil and gas sector, after BP announced a record set of full year numbers which has seen the shares rise to their highest levels since January 2020.”

Michael Hewson, UK Chief Market Analyst at CMC Markets

In the U.S., Wall Street opened its session shakily on Tuesday morning as investors anticipated Federal Reserve chair Jerome Powell's first public appearance after a strong job market report last week. Powell's less hawkish tone, however, boosted the American stock market. All three major indexes concluded the trading session higher.

Bank of England to further increase interest rate

Catherine L. Mann, a Bank of England Monetary Policy Committee member, said further hikes were more likely than not. Last week, the BoE increased the interest rate by 50 basis points, placing the benchmark rate at four percent.

Mann, who spoke at the Lámfalussy Lectures Conference in Budapest, explained that it was difficult to determine whether inflation in England had reached a "turning point" that would allow the bank to loosen its tight policy.

"If there is uncertainty about the degree of inflation persistence, it is better to assume a high degree because the costs of making a mistake if the true inflation process is more persistent are larger than if the true inflation process is less persistent," Mann added.

Mann noted that the U.K. was behind the U.S. and Eurozone in showing signs of peaking inflation. She explained that Brexit was partially responsible for the condition.

In London, the BoE's interest rate hike has an immediate effect on the bills of around 200,000 homeowners who are on variable-rate mortgages and other 250,000 homeowners whose fixed-rate deals ended right in time with the new rate policy.