Europe: Britain's FTSE boosted by Shell, bank test relief

[MILAN] The UK's top share index rose on Tuesday as oil heavyweight Royal Dutch Shell surged after a solid earnings update and a Bank of England stress test on banks delivered no nasty shocks.

A rally of more than 20 per cent in Ocado following an "transformative" deal with French supermarket Casino livened up the session for the country's mid cap stocks.

The FTSE 100 index extended gains to end the session 1 per cent higher, the standout European performer thanks to stronger energy and financial stocks.

Shell rose 4 per cent, leading gainers on the FTSE. The oil and gas major cancelled an austerity dividend policy and boosted its cash generation forecasts, drawing a line under three years of oil price turmoil.

"This strategy update indicates significant progress,"analysts at Jefferies said in a note.

Britain's FTSE 350 bank index rose 0.7 per cent. After carrying out its annual health check on lenders, the Bank of England said banks could cope with a "disorderly" Brexit without needing to curb lending or to be bailed out by taxpayers.

It said that for the first time since it started'stress-testing' banks in 2014, none of Britain's major lenders would need to raise extra capital.

"Overall, the results show that there are pockets of problems in the sector but that the banks are broadly ticking all of the right stress test boxes," said Laurent Frings, Global Head of Credit Research at Aberdeen Standard Investments.

"They are now much better capitalised and more heavily scrutinised by the regulator than before the crisis," he added.

At the single stock level banks showed mixed performances.

Among banks that passed the test without reservations, HSBC rose 1.3 per cent and Standard Chartered added 1.1 per cent, but Lloyds fell 1 per cent.

Barclays was down 0.1 per cent and Royal Bank of Scotland gained 1.4 per cent.

Elsewhere, Ocado surged as much as 37 per cent during the day before ending up 20.8 per cent, leading gainers on the mid cap index which rose 0.7 per cent.

French supermarket Casino signed a deal with Ocado to use the British online retailer's grocery e-commerce platform to develop its online business, starting with Monoprix.fr.

"This is a transformative deal for Ocado as not only will it expose the firm to a large chunk of the French market, it could also be the launch pad for many more international partnerships," said Neil Wilson, market analyst at ETX Capital.

Elsewhere among mid-caps, Pets at Home fell 10.6 per cent following results and news that its CEO Ian Kellett will step down and will be replaced by the head of the company's retail business, Peter Pritchard.

REUTERS