Energy stocks, homebuilders boost FTSE 100; DH Smith slumps

British shares ended higher on Tuesday led by gains in heavyweight energy and homebuilder stocks, while investors hoped that the central bank will keep interest rates at record lows despite a recent rise in inflation.

The benchmark FTSE 100 index climbed 0.5pc, with British Land and Land Securities being the top gainers, up between 3pc and 4.7pc after J.P. Morgan raised its price target on both the stocks on expectations of higher footfalls once the economy reopens.

Britain's biggest seller of building materials Travis Perkins gained 6.7pc after it raised its full year earnings outlook.

The domestically focussed mid-cap index rose 0.9pc.

Britain's central bank is set to meet later this week to discuss its massive bond-buying program after inflation surged past its 2pc target in May.

"Investors are slowly getting used to the idea that all of this talk about the prospect of rate rises and tapering is merely finessing a timeline... when it comes to withdrawing stimulus and potentially raising rates," said Michael Hewson, chief market analyst at CMC Markets UK.

The FTSE 100 had surpassed the 7,000 mark in April on attractive valuations, easing COVID-19 lockdowns and a steady economic rebound, but the pace of gains has since slowed due to inflation concerns.

The energy index gained 2.14pc with Royal Dutch Shell and BP being the top boost to the FTSE 100 index.

Among stocks, Melrose gained 2.5pc on its plans to return about 730 million pounds ($1.01 billion) in cash to its shareholders.

Cardboard maker DS Smith fell 1.7pc, the second biggest loser on the FTSE 100 index after reporting a 38pc slump in annual pre-tax profit.

Britain's Senior Plc dropped 9.9pc after it rejected a $1.2 billion buyout offer from Lone Star Global, saying the sweetened proposal undervalued the aircraft and car parts supplier.