Market report: BA owner IAG starting to gain height as cheaper fuel offsets black spots

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The prospect of cheaper fuel gave shares in British Airways owner IAG a lift.

Brent crude slipped 93 cents to $47.39 a barrel, a fall of nearly 2%. This gave away gains made yesterday as Opec warned the oil market would remain flooded until next year and as expectations of an interest rate rise cooled ahead of the Federal Reserve policymakers’ vote next week.

Fed Governor Lael Brainard made it clear she wanted to see stronger US consumer data before hiking rates, comments which sent the dollar down.

Today, it went in the opposite direction, making it more expensive to own commodities such as oil that are priced in the US currency.

The move lifted IAG by 7.9p to 425p. The long-haul carrier has been relying on cheaper fuel to offset plenty of other black spots for airlines, including terrorist attacks, strikes, the Brexit vote, and exchange rate movements. 

The FTSE 100 giant is taking advantage of cheaper oil prices as its historic fuel hedges, which have hampered airlines since the price collapsed in 2014, unwind.

Lower Brent also buoyed cruise ships operator Carnival, which rose 39p to 3411p, but caused shares in Shell and BP to sink 22p to 1907.5p and 6.79p to 421.91p. 

Despite signs that the Fed might refrain from pulling the trigger on a rate hike next week, the FTSE 100 continued on its downward slope, losing 15.67 points at 6685.23.

Primark owner Associated British Foods, off 85p at 2730p, remained out of fashion with investors as a wave of broker downgrades hit the stock, including from Jefferies, which slashed its rating to underperform. 

Yesterday, the group disappointed investors with lacklustre trading at its discount clothing chain.

HSBC retreated 8.9p to 556.7p as analysts at Citi swapped their buy rating for a neutral after the share price rally since the Brexit vote.

Punters continued to pile into Algy Cluff’s AIM gas firm Cluff Natural Resources, which fired up 1.12p to 7p. Investors have made six times their money in three weeks since the company revealed its North Sea block contains as much as three trillion cubic feet of gas.

Receiving a United States patent for its skin treatment Episalvan injected life into Amryt, up 0.97p, or 5%, to 21.22p.

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September 13, 2016 |
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