LONDON MARKETS: FTSE 100 Moves Up, With Bank Stocks Rising After BOJ Decision
September 21 2016 - 7:05AM
Dow Jones News
By Carla Mozee, MarketWatch
U.K. logs smaller budget deficit
U.K. stocks were modestly higher Wednesday, led by financial
shares as investors embraced a Bank of Japan monetary policy shift
that should benefit yield-hungry banks.
The FTSE 100 picked up 0.3% to 6,849.80, but pared a heftier
rise in part as shares of Royal Bank of Scotland PLC were left out
of gains made within the bank space. On Tuesday, the London
benchmark rose 0.3%
(http://www.marketwatch.com/story/ftse-100-becalmed-as-traders-wait-for-central-banks-2016-09-20)
to 6,830.79.
Stocks on Wednesday rose after the BOJ unexpectedly said it
would start targeting 10-year interest rates, committing to keep
them around zero
(http://www.marketwatch.com/story/bank-of-japan-keeps-rates-steady-tweaks-policy-framework-2016-09-21)
as part of a new policy framework aimed at bolstering inflation.
The central bank said it will maintain quantitative easing until
its inflation target of 2% is overshot, and it kept its main
interest rates unchanged.
"The market seems to be giving the BOJ a tentative thumbs up,"
said Richard Perry, market analyst at Hantec Markets, in a note.
"However, perhaps it is a bit early to celebrate, as now the market
will look forward to tonight's Fed decision."
He pointed out the initial reaction was for the yen to weaken,
the Japanese government bond yield curve to steepen and Japanese
equities to push higher. Japan's Nikkei
(http://www.marketwatch.com/story/asian-markets-mixed-as-investors-await-boj-decision-2016-09-20)
rose nearly 2%, and the Topix's banking subsector gained nearly
7%.
The BOJ's monetary policy shift means that yield curve control
is now the central bank's focus, Perry noted.
Banks shares top-up: The effort to steepen the yield curve was
embraced by buyers of bank stocks, as financial institutions
typically borrow on short-term rates and lend money on longer-term
and higher rates.
London-listed bank shares advanced, with Barclays PLC (BCS)
(BCS) up 3.4%, Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) rose
2%, and Standard Chartered PLC (STAN.LN) tacked on 0.9%. HSBC PLC
(HSBA.LN) (HSBA.LN) picked up 0.7%.
But Royal Bank of Scotland PLC (RBS.LN) (RBS.LN) shares fell
0.9% as Spanish lender Santander (SAN) (SAN) reportedly walked away
from talks to buy the majority state-owned bank's Williams &
Glyn branches.
Fed ahead: Investors have another key central bank meeting to
grapple with later Wednesday. The U.S. Federal Reserve's decision
on whether to raise interest rates is due at 7 p.m. London time, or
2 p.m. Eastern Time.
Read:Here's how the Fed's doves and hawks will use the new
inflation and sales data
(http://www.marketwatch.com/story/fed-hawks-will-leverage-inflation-data-to-get-their-way-doves-will-counter-with-retail-sales-2016-09-16)
Corporates: Diageo PLC (DEO) (DEO) shares edged up 0.1% although
the Johnnie Walker whisky maker said the fiscal year has started
well
(http://www.marketwatch.com/story/diageo-upbeat-expects-to-hit-growth-target-2016-09-21)and
that it expects hit its growth target. Diageo shares have been
higher over the past four sessions.
Imperial Brands PLC (IMBBY) (IMBBY) shares fell 2% after rising
for four straight sessions. Jefferies initiated coverage of the
tobacco maker with a buy rating, saying actions the company has
undertaken "have positioned it well to deliver EPS growth of
mid-single digit over the medium to long term." British American
Tobacco PLC (BATS.LN) (BATS.LN) edged up 0.2%, also initiated with
a buy rating at Jefferies.
Data: The U.K. government in August spent GBP10.5 billion more
on public services than it received in revenue, the Office for
National Statistics said Wednesday. That's lower than the deficit
of GBP11.5 billion marked in the year-earlier period. But the
Office for Budget Responsibility still expects the government will
overshoot the watchdog's annual borrowing forecasts
(http://www.wsj.com/articles/u-k-s-august-budget-deficit-lower-than-last-year-1474449206).
The pound was buying $1.2999 compared with $1.2988 late
Tuesday.
(END) Dow Jones Newswires
September 21, 2016 06:50 ET (10:50 GMT)
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