Robust banks and mining stocks fuelled the FTSE’s rise on Thursday, running ahead of European peers with HSBC leading the pack after Morgan Stanley piled praise on a bank already benefiting from a strong upturn among financials globally. Britain’s major share index was up 0.5 percent, comparing favourably with euro zone stocks which turned lower after an upbeat start. British banks jumped 3 percent to a four-month high after the U.S. regulator approved higher dividends and buybacks, sending a ripple effect across financials worldwide.
The Fed approved plans from all the 34 largest U.S. banks, including U.S. units of HSBC and Deutsche Bank, to use extra capital for stock buybacks and other purposes beyond a cushion against possible catastrophe. HSBC stole the show, up 4.8 percent to a near four-year high after a Morgan Stanley upgrade to ‘overweight’ added to enthusiasm over the U.S. regulator’s approval. Analysts said they saw capital return rising up the agenda for the bank, with around $45 billion of surplus by 2019.
“Our work suggests HSBC will be in the top quartile of EU banks for cash returns over the next three years,” said Morgan Stanley analysts. “HSBC’s weighting towards Asia sets it apart from everything else that’s listed here. I can see why there’s potential for a split where people start looking at HSBC instead of Lloyds, who are far more exposed to Brexit risks,” said Gareth Burchell, partner at Shard Capital. “HSBC pays a very high dividend which is also attractive,” he added.
Miners Anglo American, Glencore, BHP Billiton and Antofagasta underpinned robust gains, as copper and gold prices climbed against the weaker U.S. dollar. Meanwhile Royal Mail hit a two-month low, last down 3.1 percent at 414.6 pence. “We are buyers if the stock gets back towards 4 pounds,” said Burchell. “We’re keen on what they’ve got in terms of real estate and how they are commercialising that.”
Mid-caps also saw some robust company moves, with hefty losses from JD Sports sending the index down 0.1 percent. Packaging company DS Smith jumped as much as 9 percent, hitting an all-time high after reporting some upbeat full-year results and a planned $920 million acquisition of 80 percent of U.S. corrugated packaging firm Interstate Resources.
“While the headline 16.8 times multiple of operating profit looks expensive, the deal is more reasonable post synergies,” said analysts at Davy Research. JD Sports sank 10 percent, set for its worst day in a year, after a trading update showed sales growth in line with expectations.
“The muted tone of the statement could weigh on the share price in the near-term,” said George Mensah, analyst at Shore Capital. And value investor darling Purple Bricks gained 4.3 percent after reporting full-year revenue for the online real estate agency was up 151 percent.