LONDON: The U.K.’s top share index advanced Monday, rebounding from the previous session’s four-month low as shares in financials rose and higher oil prices boosted energy shares, while late comments from Bank of England Gov. Mark Carney helped cement gains. The blue-chip FTSE 100 index was up 0.5 percent at 7,253.28 points, joining a broader rally in risky assets across European bourses.
Last week a surge in sterling to its highest level since the Brexit vote sent the FTSE 100 to its lowest since the end of April, as its predominantly international, dollar-earning firms were hit.
The pound eased back Monday, extending losses after afternoon comments from Carney reiterating that the central bank would raise rates in the coming months, but adding that hikes would be limited and gradual.
Sterling’s slide boosted the FTSE to end at a session high.
“The prospect of a softer Brexit and rising expectations of an interest rate hike could lead to a further appreciation of the GBP against the EUR. Conversely, a stronger GBP is weighing on U.K. equities,” analysts at Credit Suisse Wealth Management said in a note. “We remain negative on U.K. equities given their high overseas exposure.”
Financials, which tend to be more volatile than other sectors, added the most to gains, with shares in HSBC, Standard Chartered and Barclays gaining 0.5 percent to 1.6 percent. Other cyclical sectors, such as energy, also rose, with heavyweights BP and Royal Dutch Shell both up 0.7 percent as oil prices hit $50 per barrel.
Defense firm BAE Systems was among the biggest individual risers, jumping 4.2 percent after Qatar signed a deal to buy 24 Typhoon aircraft from the company.
“We believe the market was not expecting a Qatar order for Eurofighter – considering its previous orders for Rafales and F-15 military jets,” analysts at UBS said in a note. “Furthermore we believe the market could now allocate a higher probability for further orders from new/existing customers going forward,” they added.
Engineering firm GKN was another top gainer, jumping around 3 percent following an upgrade from Exane BNP Paribas to “neutral” from “underperform,” with the broker citing benefits from possible future disposals.
Defensive shares including tobacco companies Imperial Brands and British American Tobacco and precious metals miner Randgold Resources brought up the rear on the FTSE.
Among midcaps a jump in esure’s shares helped the index gain 0.3 percent. Shares in esure soared 6.1 percent following a media report that the insurer’s biggest shareholder Peter Wood was looking to sell his 30.8 percent stake.
Shares in Provident Financial fell 5.5 percent, taking their year-to-date losses to 74 percent, fresh from the company’s demotion to the midcap index.
A trader said its slide could be related to the index change and souring investor sentiment after RBC downgraded the stock last week.