Banks, oil majors lift British shares higher
By Bansari Mayur Kamdar and Johann M Cherian
(Reuters) -UK’s FTSE 100 reversed early losses on Tuesday, as banks and energy stocks bounced back after a rough selloff in the blue-chip index last week on fears more aggressive interest rate hikes from central banks may lead to a global economic slowdown.
The FTSE 100 index was up 0.6%, as of 0801 GMT, and on track for its best performance in a month.
“It’s a bit of a buying after some selling conditions triggered by Jackson Hole and Powell’s comments at the end of last week,” said Patrick Armstrong, CIO at Plurimi Wealth.
The UK market was closed on Monday for the August bank holiday and is playing catch-up to European and U.S. markets, which got off to a negative start to the week after Federal Reserve Chair Jerome Powell on Friday cautioned against expecting a swift undoing of its rate tightening.
Lifting the resource-heavy FTSE 100, oil majors BP and Shell gained 2% each. Energy stocks are the top performers so far this year in the FTSE 100 and on track for their fourth straight weekly gain as oil prices surged. [O/R]
Rate-sensitive banks advanced 2.4%.
“They’re trading below tangible book value, which has historically been a good time to buy the banks,” said Armstrong.
Meanwhile, British two-year government bond yields briefly leapt by as much as 25 basis points to their highest since October 2008 at 3.072%.
The domestically focussed mid-cap index added 0.6%, with financial and industrial stocks boosting gains.
Shares of Bunzl Plc fell 4.3% even as the British business supplies distributor raised its 2022 group operating margin outlook.
“Although it raised its operating margin outlook, it is still expected to fall in the full year versus 2021,” said Victoria Scholar, head of investment at Interactive Investor.
Data showed Britain’s services businesses reported a record increase in costs over the past three months and are downbeat about the future, as inflationary headwinds look set to squeeze demand further.
(Reporting by Bansari Mayur Kamdar and Johann M. Cherian in Bengaluru; Editing by Krishna Chandra Eluri and Sherry Jacob-Phillips)
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