By Helen Reid
LONDON (Reuters) - British shares recovered on Wednesday, touching a two-week high, as oil and gas stocks gained and luxury retailer Burberry jumped. Mid-cap Carillion plunged to a record low.
The blue-chip FTSE 100 (FTSE) index ended the day up 1.2 percent, with mining stocks leading the gains.
Comments from Federal Reserve Chief Janet Yellen interpreted as dovish helped British stocks, sealing the FTSE's best day since April 24. Slower rate rises boost stocks, which benefit from a higher yield relative to bonds.
Oil stocks supported the index as crude prices rose above $48 after a drop in U.S. fuel inventories raised hopes a supply glut was easing. Royal Dutch Shell (L:RDSa) and BP (L:BP) were up 1.8 percent each, among the top FTSE gainers.
Spending by Chinese tourists making the most of a devalued pound boosted luxury trenchcoat maker Burberry (L:BRBY), whose shares rose 2.5 percent after its like-for-like sales rose by double the rate expected by analysts.
"This is an encouraging performance from Burberry, which looks to be at long last pulling out of the doldrums," said Steve Clayton, manager of the Hargreaves Lansdown (LON:HRGV) select UK growth fund.
Micro Focus (L:MCRO) was among the stocks falling the most, dropping 7.4 percent. Disappointing full-year results cast doubts over its planned deal to acquire HP's (N:HPE) software assets.
"Micro Focus shares have been soggy since the May 9 news of poor trading at HPE Software, and now there are growing concerns about the expected U.S. flowback," Stifel analysts said in a note.
But shareholder Colin McLean, of SVM Asset Management, said, "We are still holding. We are not concerned on integration issues, there's bound to be hiccoughs."
Shares in education publisher Pearson (L:PSON) slid again, hitting a three-month low on investor concern over a lower dividend guidance and Liberum's downgrade of the stock.
Mediclinic (L:MDCM) shares jumped 4.7 percent. The South-Africa exposed private healthcare company was helped by a strengthening rand
Market rumour blog Wall Street Wires speculated that Mediclinic might bid for Spire Health (L:SPI), whose shares rose 4 percent. Reuters has not verified whether the companies are in talks.
Outsourcer Carillion (L:CLLN) fell as much as 29 percent to a record low, taking its losses over the past three sessions to 70 percent as worries over a potential rights issue caused another broker downgrade.
Marshall Wace led among hedge funds cashing out their short positions on Carillion. But holders of Carillion bonds were more downbeat, bracing for potential restructuring talks.
Amec Foster Wheeler (L:AMFW) bucked the trend among oil and gas stocks, falling 5.5 percent after the oil services group said the Serious Fraud Office was investigating it over allegations of bribery and corruption.
Wood Group (L:WG), which agreed to buy Amec Foster Wheeler in a 2.2 billion-pound deal, fell 6.5 percent. Analysts said the merger would go ahead and should be completed in the fourth quarter.
Small-cap Premier Oil (L:PMO) shot up 36 percent after the company made an oil discovery off the shores of Mexico.