Britain's FTSE lifted by bank recovery

  • 12/02/2016
(iStock)
(iStock)

By Kit Rees

UK shares rose on Friday (local time) as bank stocks and shares in commodities-related companies recovered following a slump in the previous session, while Rolls-Royce also jumped after a well-received update.

Britain's blue-chip FTSE 100 index was up 1.6 percent at 5,626.70 points by 0914 GMT, having fallen to its lowest point since late 2012 in the previous session.

Banks were among the top sectoral gainers, with the FTSE 350 Banks index rebounding from a seven-year low to trade up 3 percent, led by a 7.1 percent rise in Standard Chartered and a 4.7 percent gain in Barclays.

The banking sector has come under pressure this week following concerns about the industry's profitability in a low-growth, low-interest rate environment, yet positive results from Germany's Commerzbank gave a lift to banks across Europe.

"[Banks have had] a lot of pressure on them to increase their lending through all the quantitative easing cash that's coming their way and the negative rates that we've seen begin to materialise in central banks," Alastair McCaig, market analyst at IG, said.

Mining stocks also gained, with the FTSE 350 Mining index rising 4.9 percent.

Oil prices jumped higher following comments by the energy minister of OPEC member United Arab Emirates which sparked hopes of a co-ordinated production cut, lifting investor sentiment towards the sector.

The FTSE 350 Oil & Gas index rallied 3 percent, with oil heavyweights Royal Dutch Shell and BP adding over 13 points to the index.

The top gainer on the blue-chip index, however, was aircraft engine-maker Rolls-Royce, which surged more than 14 percent after a positive update in which it left its 2016 guidance unchanged.

A slowdown in demand for some of its engines has hit the company, causing its full-year profit to slide 16 percent. The company, which issued three profit warnings last year, halved its dividend, but investors cheered the move to strengthen its finances.

The stock is set for its biggest daily gain since November 2008.

"Investors breathed a sigh of relief that the group did not issue a further profit warning and that it only cut its dividend whereas many feared it might be scrapped," Russ Mould, investment director at AJ Bell, said in a note.

On current trends the FTSE 100, down more than 10 percent so far this year and around 7.5 percent this month, is set for its biggest monthly loss since February 2009.

AAP

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