Stocks in the UK rose on Tuesday with the FTSE 100 reaching over 6400 and its highest since November 5. European shares were more mixed with the German DAX dipping slightly from the 3-month highs reached yesterday.
The financial sector carried the FTSE 100 higher after all seven banks passed the Bank of England’s stress tests and the financial stability board determined that the financial system has moved out of its phase of heightened risk aversion. Bank stress-tests are part regulatory oversight and part confidence building exercise so the assumption was that all would pass. The icing on the cake was BOE governor Mark Carney saying banks would need to hold Tier 1 equity of 11% of risk-adjusted assets by 2019, less than many already had as of September.
Home Retail was top riser on the FTSE 100 after a report that the former Garden Centre chief Nicholas Marshall is eyeing a bid for the group’s DIY chain Homebase using private equity. No offer has been made but Mr Marshall outing himself as a possible bidder implies a deal may not be too far away. Profits have been rising under former Tesco (L:TSCO) exec Echo Lu so there’s a feeling that shareholders might get better value if Homebase was stripped away from Argos which last month forced Home Retail into a shock profit warning before the key holiday season.
Aberdeen Asset Management was a top faller after the Bank of England’s plans for stress tests of asset management firms added to the woes for the fund, which announced a massive 12.5% funds outflow over the past year.
A moderate improvement in Chinese manufacturing data supported commodity prices, helping mining companies rise on the UK benchmark, with even BHP Billiton (L:BLT) picking up off seven-year lows.
The British pound slipped against the euro but remained positive versus the dollar after factory orders slowed more than expected in November according to the latest Manufacturing PMI reading.
US stocks look set for a stronger open on Tuesday ahead of manufacturing data and a speech from FOMC voting member Charles Evans which could shed some light on the chances of a December rate hike ahead of Friday’s jobs report.
USA pre-opening levels
S&P 500: 6 points higher at 2,086
Dow Jones: 58 points higher at 17,777
Nasdaq 100: 12 points higher at 4,676
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