A buoyed banking sector after passing Bank of England (BoE) stress tests yesterday pushed the FTSE 100 upwards, making up for underperforming European indices in the previous session.
Financial stocks added nearly 20 points to a 39.56 point advance for the blue-chip index, which was up 0.6 per cent at 6,395.65 by the close.
Barclays’ share price rose 4.61 per cent to 233.5p, while RBS’ stock rose 3.24 per cent to 312.2p per share and Lloyds’ shares closed 2.4 per cent higher at 74.71p. HSBC’s share price ended the session 1.79 per cent up at 349p per share.
While RBS and Standard Chartered, which fell a marginal 0.09 per cent, only passed because of steps they took to improve their capital ratios during the testing process, the other lenders did not have to take action.
BoE governor Mark Carney said there was no new wave of capital regulation for banks in the pipeline.
IG said: “A strong showing from bank shares in the wake of the BoE’s stress tests, and an impressive bout of bargain hunting in mining firms following this morning’s China figures, put the index back on course for 6,400.”
SAS UK & Ireland’s head of risk solutions, Simon Goldsmith, said: “Bank executives must be breathing a sigh of relief… It is reassuring for consumers and financial authorities to recognise that the industry has tightened up how it conducts its business.”
Among fallers, Babcock retreated 1.4 per cent after a downgrade to “sell” from Citi analysts.
“While Babcock is an excellent operator with solid barriers to entry in a growing market, we currently see too many risks for comfort around its shares’ investment case,” Citi analysts said in a note.
Aberdeen Asset Management slid 1.44 per cent to 314.8p per share as the Bank of England’s plans for stress tests of asset management firms added to problems for the company, which yesterday announced a 12.5 per cent reduction in assets under management over the past year.
Among mid-caps, UK power supplier Drax surged 12.4 per cent after the EU cleared state aid to convert the Lynemouth coal-fired power plant to biomass.
Petra Diamonds rallied 12.63 per cent to close at 72.25p after saying it will buy a stake in De Beers Kimberley Mines in South Africa.