The FTSE 100 was on the front foot on Tuesday as strong banking stress tests boosted UK-centric sectors, including banks, retailers and housebuilders.
As the final month of the year gets underway, the FTSE 100 seems content with bouncing around the 9,700 mark in early trade before the bulls took control and pushed the index 0.4% higher.
Banks were among the top risers after the sector passed the latest set of stress tests with flying colours. Barclays, Lloyds, and Natwest were all higher by more than 1% at the time of writing.
But there were also winners away from the banking sector. Persimmon rose 1% on hopes that banks may increase lending activity and spur additional housing activity, while similar sentiment around lending saw DIY retailer Kingfisher higher on the day.
“The UK’s seven biggest banks sailed through the latest stress test, reaffirming their resilience and earning a regulatory nod to ease capital buffers,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Most banks already hold capital well above the minimum by choice, so any shift in strategy may take time – but in theory, it frees up extra capital for lending or capital returns.”
“However they use the new freedom, this is another clear signal that the UK banking sector is in robust health. This was largely expected, but the confirmation should still be taken well, especially after dodging tax hikes in last week’s Budget.”
Broker ratings also played a part in trading on Tuesday. Berkeley Group was unable to join the housebuilder rally after RBC downgraded its rating to underperform from outperform and cut its price target to 3,700p from 4,900p. Berkeley shares were down 1.6% at the time of writing.
Persimmon, coincidentally, was upgraded by RBC to outperform with a price target of 1,750p. Persimmon currently changes hands at 1,347p.
Polar Capital Technology Trust was 1.4% higher, with a 0.4% gain in NASDAQ futures pointing to a strong session ahead for US tech shares.
After a storming rally yesterday, gold miner Endevaour was the FTSE 100 top faller after the group set out a 5-year plan to boost production through exploration. However, this will come at a $100m cost, which investors don’t seem to be over the moon about.