Banking stocks rally on the back of rate hike talk by the ECB
THE FTSE 100 continued its record run, closing at a new all-time high for a second successive day.
London’s blue chip index set a new intraday peak of 7,447, before finishing up 9.01 points, or 0.12pc, at 7,424.96, led higher by banking stocks which rallied on bullish broker notes and European Central Bank rate hike talk. However, gains were capped by a strong pound. Natixis raised Royal Bank
of Scotland’s rating from “reduce” to “buy” and lifted its price target to 289p from 224p as it believes the bank is “reaching a turning point”. Analysts said: “The time is near when the long-standing strengths of the core bank will outweigh the material drag of legacy items.” However, Natixis thinks RBS’s financial performance will not normalise until 2020. Morgan Stanley upgraded
Barclays’ rating to “overweight” on a brighter outlook for its fixed income revenue pool and fading capital concerns. Analyst Chris Manners said: “After a decade of secular declines, fixed income revenues can start to sustainably grow.”
Separately, ECB policymaker Ewald Nowotny said the bank would decide at a later date whether to raise interest rates before or after ending its bond purchase programme. In its wake, RBS climbed 3.3p to 243.9p and Barclays added 1p to 230.4p. However, Lloyds dipped 0.2p to 69.3p.
The insurance sector also climbed amid speculation in the City that the recent Ogden discount rate decision will be amended. Last month, the government cut the Ogden discount rate used to calculate lump sum payments for personal injury claims to -0.75pc from 2.5pc, which would lead to higher payouts and weigh on insurers’ profits. Separately, Bernstein raised
Admiral’s price target to £20 from £19.15. Shares in Admiral jumped 37p to £19.45, Direct Line added 0.6p to 334.4p and Hastings rose 6.8p to 253.3p.
Antofagasta eked out gains of 8.5p to 852.5p on the back of two bullish broker notes. Deutsche Bank hiked its price target to 800p from 700p, while Citigroup said the miner is “regaining its mojo”.
Elsewhere, JP Morgan raised Prudential’s rating to “neutral” as concerns about its US and UK business recede, sending shares 7p higher to £17.61.
On the other side, Randgold Resources shed 30p to £70.70, after Numis downgraded its rating to “hold” as it sees limited upside for the FTSE 100 stock. Pharma giant Hikma received its second rating downgrade in two days. HSBC cut its rating to “reduce” amid concerns about generic drug pricing after Thursday’s downgrade by JP Morgan. Shares tumbled 22p to £21.68. Tullow Oil suffered its worst day in almost 13 years, plunging 35p to 202.3p, after announcing a £607m rights issue. Meanwhile, Berkeley Group rallied 181p to £31.44 after it said it sees full-year profits coming in at the top end of market forecasts. Barratt Developments climbed 8.5p to 543p and Taylor Wimpey added 2.2p to 194.7p. Finally, Panmure Gordon surged 64.7pc to 98p after Bob Diamond’s Atlas Merchant Capital, alongside Q Invest, reached a deal to take the stockbroker private.