British utilities re-energised after investors make a bet on new gains

Britain’s energy giants seldom find they’re in favour, but investors gave them the thumbs up on Friday as they helped lead the Footsie’s surge.

British Gas-owner Centrica and United Utilities have been treated like political footballs in recent years with Labour proposing to “regain control of energy supply networks” should Jeremy Corbyn win the next election.

The Tories have been equally hostile — promising to cap energy bills.

But despite the political criticism, analysts at Credit Suisse have spotted an opportunity. Since the EU referendum Centrica’s share price has fallen 40%, whereas over the past 18 months the sector has dropped 25% as whole.

Credit Suisse analyst Mark Freshney said: “Centrica and SSE have underperformed to the extent that the UK domestic energy supply businesses come almost free, in our view.”

Freshney was also keen to play down the political risks, adding: “Should there be a Labour-led government then re-nationalisation would be difficult. The spread of the £147 billion of regulated assets across debt and equity investors would require compensation.” Credit Suisse now expects Centrica to outperform and shares rose 2.7p to 144.5p. SSE, which is merging its UK domestic business with NPower, was up 6.6p to 1306p. United Utilities was upgraded to neutral and shares climbed 11.2p to 811p.

The rally in utilities helped the FTSE 100 hit a fresh intra-day day, up 23.14 points at 7720.31.

Broker upgrades were coming thick and fast, with Anglo American shares climbing after Jefferies handed the miner a Buy recommendation.

Analyst Christopher LaFemina said: “Mining sector fundamentals are very strong because of serious supply constraints at existing mines, a lack of supply growth from new projects, stable Chinese demand, and improving demand in the rest of the world.” Investors were cheered and Anglo’s stock rose 17.8p to 1623p.

In the airline sector, easyJet saw passenger numbers rise despite heavy snowfall forcing 500 cancellations in December. In total 5.9 million people flew on its planes in the month, a rise of 5.5% on 2016. This week rival airline Ryanair reported a 3% jump in traffic over the Christmas period. Shares in easyJet ticked up 7p to 1517p.

Outside the top flight, Ultra Electronics was the major loser after news of a delay to the UK defence review.

Shares in the defence and aerospace technology provider fell 10.7p to 1283p: BAE, Chemring and Cobham also all saw falls.

Guitar seller Gear4music shares were also down 22p at 750p, despite announcing sales jumped 42% to £34.6 million in the four months to 31 December.

But shares in engineering firm Keller climbed 41p to 1000p thanks to President Donald Trump. US tax reform is expected to see the group’s tax rate drop to 29% from 34% and analysts at Peel Hunt slapped an upgrade on the stock.