Oil sector gains help return London to positive territory

Buoyed by the 3 per cent rise for the heavyweight oil stock, London's benchmark index started the new quarter where it left off after its best September in 13 years.

Gains for other commodity stocks and a 5 per cent jump at gas exploration group BG, amid fresh takeover speculation, meant the FTSE 100 Index finished the day 44.28 points higher at 5592.90.

The resources sector was lifted by figures pointing to stronger growth in Chinese manufacturing, suggesting the country is not slowing as sharply as feared.

The economic picture in the United States was more mixed as evidence of weaker activity among industrial firms was offset by data showing a slight improvement in consumer sentiment and spending.

In the clearest calls yet by US Federal Reserve officials to pump more cash into the economy, two Fed policymakers said yesterday that more action would likely be needed unless the outlook improves.

William Dudley, president of the Federal Reserve Bank of New York, described current conditions of high unemployment and low inflation as "unacceptable".

His comments prompted the dollar to accelerate losses against the euro, traders said, as investors saw an increased likelihood of the Federal Reserve printing more of the US currency to buy more assets.

Chicago Federal Reserve Bank President Charles Evans said more easing was "desirable" and framed the debate over further easing by the US central bank as one of "how much" and "how", rather than whether it should take steps in the first place.

With investors clinging to hopes of recovery, oil prices climbed above 80 US dollars a barrel for the first time in six weeks, leading to gains of 31p to 1888p for Royal Dutch Shell and a 34p improvement to 1308p at Tullow Oil. Shell has been mentioned as a potential suitor for BG Group, which topped the risers' board with a gain of 511/2p to 1170p.

New chief executive Bob Dudley's first day as BP boss following the departure of Tony Hayward went well as shares rose 123/4p to 4401/2p.

Investors were encouraged by his comments that BP's board will consider the return of the company's dividend early next year.

The rise came as BP said the clean-up bill for the Gulf of Mexico oil spill now stood at 11.2 billion US dollars (7.1bn).

In currency markets, the euro drew encouragement from economic turnaround hopes as it reached a six-month high against the dollar and edged ahead against the pound.

The recent weakness in the dollar, which slipped against sterling on Friday, has been an upward factor in crude prices as it makes oil cheaper for buyers in other currencies.

The wider market will be tested in the coming weeks as the third quarter earnings season looms in the United States and the UK.

Marks & Spencer, which is due to post a trading update next week, rose 31/2p to 3915/8p and supermarket Tesco lifted 41/8p to 4281/8p ahead of half-year results on Tuesday.

In a quiet session for corporate news, claims handling firm Helphire rose 5 per cent, up 2p to 39p, after a return to profits in the year to June 30.

The surplus of 392,000 compared with losses of 149m a year earlier and offset warnings of lower-than-expected trading, as economic conditions and record petrol prices keep drivers off the roads.

The biggest FTSE 100 risers were BG Group, ARM Holdings ahead 123/4p to 405p, BP, and Lonmin which finished the session 47p better off at 1716p.

The biggest fallers were Experian down 19p to 674p, Aggreko off 31p to 1539p, Compass down 91/2p to 521p and Associated British Foods which ended the day 18p lower at 1031p.