US rate hopes buoy FTSE

The market was up around midday as investors predicted that policymakers at the US Federal Reserve would hold interest rates when they meet later today. The FTSE 100 index rose slightly by 8.8 points to 5837.

Hopes that US rates would remain unchanged were reflected most strongly in banks, with Barclays up 7.5p to 639p. Lloyds TSB also saw its shares rise, by 3.5p to 523p, but Standard Chartered eased 21p as its first-half results only narrowly beat expectations. The chief executive, Mervyn Davies, also hinted that the bank was no longer in the bidding race for South Korea's biggest credit card provider, LG Card.

Property companies were also having a field day as the Nationwide Building Society raised its forecast for UK annual house price growth in 2006 to 5%, despite last week's surprise quarter-point interest rate rise by the Bank of England. Slough Estates jumped 11.5p to 662.5p, British Land rose 19p to £13.70 and Land Securities was up 20p to £19.47.

Investors also reacted positively to Slough Estates' disposal of three properties for a total of £109.2m. The commercial property group said the disposal was the latest move in its capital recycling strategy.

On the energy front, International Power was lifted 4.25p to 300p as broker JP Morgan increased its target price to 330p from 240p, and reiterated its overweight rating, citing an improved outlook. The energy company reports its first-half results on Thursday.

But profit concerns for a few companies limited gains for the FTSE 100, as shares in the brewer Scottish & Newcastle fell 18.5p to 514p amid worries over its British margins, despite reporting a 12% rise in first-half pre-tax profits. Analysts worried that despite the World Cup and warm weather, profits were not as high as they could be.

Profits were also a concern for Friends Provident as it reported an expected 9% drop in first-half underlying profits, despite beating forecasts for its sales, which were up 39% to £3.03bn. Shares in the insurer were down 4.5p to 176p.

Meanwhile, BP dropped even further after it announced the closure of its Prudhoe Bay oilfield in Alaska yesterday due to a leaking pipeline. Prudhoe Bay is the biggest oilfield in the US. Shares in the oil major dropped 13.5p to 622.5p yesterday, and dropped further today to 612p, depriving BP of its place as the second-largest public oil company in the world to Royal Dutch Shell. Company executives have said the oilfield might not be reopened for months and some analysts lowered their ratings on the group.

Oil prices eased slightly after reaching a record yesterday as London Brent crude hit $78.64. It was trading 41 cents lower at $77.89 today.

Dana Petroleum announced the start of production at its North Sea Goosander oilfield, and shares rose accordingly. The UK-based oil and gas explorer and producer was the top gainer in the FTSE 250 - up 89p to £13.09. The group's oilfield, which it owns with Venture Production, has come on stream ahead of an expected build-up to 9,500 barrels a day. The site is expected to have 15.2m barrels of reserve oil. Venture Production was up 20.5p to 830p.

Surprisingly, ITV slipped 1.5p to 100p despite the chief executive, Charles Allen, announcing he would step down. The finance director, John Cresswell, is to step into his role from October before a permanent replacement is found. Mr Allen has long been seen as a drag on the commercial television channel's share price, and analysts expected such an announcement to help the shares. But a poor outlook for advertising revenue which is expected to be announced tomorrow, weighed on the stock.