Bullish brokers boost banks as energy and mining stocks sag

BULLISH broker comment helped push the banking sector higher yesterday, as Britain’s top share index neared key technical resistance levels after its recent rally, with commodity stocks weighing on the upside.

The FTSE 100 closed 3.73 points, or 0.1 per cent, higher at 5,904.49, near its 50-day moving average of 5,933.83. The index has traded below its 50-day moving average since 4 March.

London’s blue chip index gained 3.2 per cent over the course of last week, its best weekly performance since early November.

“Investors will want to see these levels maintained for a while before pushing on,” Jimmy Yates, head of equities at CMC Markets said.

Barclays Capital named HSBC, Standard Chartered and potentially Royal Bank of Scotland, up 0.6 to 0.8 per cent, among the cheapest names in the banking sector.

The broker said it has looked at 11 of Europe’s largest banks and all are trading at a discount to sum-of-their-parts valuations, calculating that around €150bn are missing from their market caps, although it adds the banks usually trade at a discount.

JPMorgan, meanwhile, reiterated its “overweight” stance on banks.

Stefan Angele, Head of Investment Management, Swiss & Global Asset Management, which has around SwFr80bn of funds under management, said the contrarian outperformance experienced by financials in the early part of 2011 may not last as investors re-focus on growth.

“I can see that over the first few months of the year we can have a rally of the lagging stocks (in 2010), but overall I still believe the pro-growth cyclical sectors will outperform these recovery rallies.”

Angele, said he liked the IT sector as well as energy and materials, which will benefit most from the global economic recovery and the business cycle.

He said those sectors will also be supported by the outperformance in terms of growth in the United States and the emerging market regaining momentum with China avoiding a “hard landing”.

Angele said he avoided utilities, telecoms and financials, sectors exposed to consumer staples.

Arm Holdings rose 2.5 per cent, with traders citing technical factors helping support the chip designer’s stock as it broke through its 20-day moving average but hovered just below its 50-day moving average.

Elsewhere, Burberry was among the top blue-chip performers, 2.8 per cent ahead, after Saudi-based retailer Fawaz Abdulaziz Alhokair said it had agreed to set up a joint venture with the British luxury goods group to market and sell its products.

Energy and mining stocks sagged with commodity prices.

Copper fell with broker Ambrian saying investors were worried that China could go through the second quarter still basically living off domestic stocks.

Kazakh-focused miner Kazakhmys fell 1.5 per cent with results due in the next session.

Man Group shed 2.2 per cent ahead of its update yesterday.

Cairn Energy, however, rose 1.7 per cent as UBS upgraded the stock to “buy”, and India’s oil minister S. Jaipal Reddy raised hopes its long-delayed transaction with Vedanta for Cairn India may go through by the companies’ target date of 15 April.

The FTSE 100 is almost flat on the year, rebounding after some of the gains seen in February were erased by Eurozone debt worriess, political turmoil in the Arab world and the aftermath of the earthquake in Japan.