London’s blue chip ended in the green on Monday as Wall Street chalked up more new highs, buoyed by the breakthrough deal with Iran, and an implied decline in global energy prices.
Among the risers, airline stocks propelled the FTSE 100 higher on Monday as the deal meant it was cheaper to fly planes around the world.
The prospect of looser sanctions saw the price of oil fall, helping British Airways owner IAG (LON:IAG) up nearly 3% and easyJet (LON:EZJ) up 2%.
The pair flew to the top of the FTSE 100, and the move was backed up by a bullish note from broker Jefferies, which now has ‘buy’ ratings on the three biggest airlines listed in London.
easyJet was the biggest beneficiary as it was lifted to ‘buy’ from ‘hold’ with a target price of £16.20 for the shares. The broker is becoming increasingly confident that the low-cost carrier can drive its share price higher still, even after a near-90% rise in 2013.
Jefferies’ target price on IAG, the group behind British Airways and Iberia, rose to 410p from 360p as it tipped the stock’s stellar performance to continue. The shares are currently trading for 373p, but it believes more progress on the Iberia restructuring will send the share price higher still.
Cruise ship operator Carnival (LON:CCL), which expects to spend £2.3bn on fuel this year, also benefited from the Iran deal.
The easing of sanctions soothed the markets as the FTSE 100 climbed to 6,694, up 20 points.
But as Mike van Dulken from Accendo Markets is quick to note, there is still the hurdle of tapering to overcome in the run up to Christmas.
“News of a deal on Iran's Nuclear capabilities is good, but not enough to counter market fears of Fed QE3 tapering being delivered just before Christmas festivities really get going and questions over the Eurozone's recovery,” he said.
Royal Bank of Scotland (LON:RBS) rose with the rest of the market despite being referred to the City watchdogs by Business Secretary Vince Cable for its dealings with small businesses.
The Financial Conduct Authority and the Prudential Regulation Authority will read in a report put together by government advisor Lawrence Tomlinson that the state-owned lender put small businesses at risk to increase its profits.
Oil stocks were the index’s laggards, with heavyweights Shell (LON:RDSB) and BP (LON:BP.) on the losing side.
But the biggest faller was engineering services group Babcock (LON:BAB) as the market gave its plans to buy a stake in Avincis the thumbs-down.
The FTSE 100 engineering services group, down 3.6%, is in talks to take a stake in the helicopter transport firm, but brokers failed to see the merits behind its plans to invest £1.5bn, with Numis, Investec and Panmure Gordon all removing their ‘buy’ recommendations.
Randgold Resources (LON:RRS) fell 3% to £42.50 as influential broker Goldman Sachs dropped its target price from £55 to £45 in a downbeat note on the gold sector.
On the mid-cap index, Chemring (LON:CHG) jumped 10% as the defence equipment manufacturer unveiled plans to sell off some of its non-core assets.
Thomas Cook (LON:TCG), which sells package holidays, rose 2% thanks to the lower oil prices, while sausage maker Cranswick (LON:CWK) brought home the bacon for its shareholders, rising 6% as profits sizzled in the first half of 2013.
IP Group (LON:IPO) rose 13% as the value of its investment, Applied Graphene Materials (LON:AGM), trebled in its first three days on AIM.
Moneysupermarket.com (LON:MONY) dipped 2.5% as City Watchdog the FCA kicked off an investigation into price comparison websites.
On AIM, Red Rock Resources (LON:RRR) spiked 30% to 0.75p, while Wessex Exploration (LON:WSX) added 17% on Monday.
Chinese software firm Geong (LON:GNG) meanwhile fell heavily despite claiming it will meet its targets for the latest six-month period.
The company said it expects to report revenues of around £4.1mln in the six months to September 30, in line with its expectations. The shares slumped 32% to 6p.