London midday: UK banks lift equities after passing BoE stress test

Banking stocks gave the UK equity market a boost after all seven of Britain’s biggest lenders passed the Bank of England’s stress tests.

Barclays, Royal Bank of Scotland and Lloyds Banking Group were among the top risers on the FTSE 100 after the stress tests showed they had enough financial strength to sustain the possibility of another financial meltdown, amid a slowdown in China and emerging markets. While RBS and Standard Chartered failed parts of the balance sheet check, they were not asked to raise more capital.

Alongside the stress test results the Financial Stability Report was also released. Investors took confidence from BoE Governor Mark Carney's affirmation that banks would need to hold Tier 1 equity of 11% of risk-adjusted assets by 2019, which is less than the 13% that was already held in aggregate by the major banks in September.

Banks will be required to have a so-called counter-cyclical capital buffer (CCB) of 1%, equivalent to an extra £10bn.

In other UK news, manufacturing activity growth slowed more than expected in November, data from Markit/CIPS revealed. The purchasing managers’ index fell to 52.7 last month from October’s 16-month high of 55.2, missing analysts’ forecasts for a reading of 53.6. A reading above 50 signals an expansion in the sector while a level below that indicates a contraction.

Earlier, Chinese manufacturing data came in mixed. The official PMI fell unexpectedly to 49.6 in November from 49.8 the previous month.

Caixin’s PMI on China manufacturing, however, rose to 48.6 in November from 48.3 in October, surprising analysts who had expected no change

Meanwhile, Markit’s final reading on Eurozone manufacturing PMI was confirmed at 52.8 in November, as expected, compared to 52.3 in October.

Separately, official data showed the Eurozone unemployment rate fell to 10.7% in October from 10.8% in September, beating expectations for an unchanged reading.

In company news, Home Retail Group surged following a report that Nicholas Marshall, a former executive of the Garden Centre Group, is mulling a bid for Homebase.

Babcock International plunged after Citi cut its recommendation to ‘sell’, warning that revenue growth will be slower than management is expecting.

Petra Diamonds jumped after buying an interest in the Kimberley Mines in South Africa from De Beers Consolidated Mines Proprietary Ltd, in a consortium with Ekapa Mining for around $7.2m.

Merlin Entertainments gained after it confirmed it is likely to end its rollercoaster year on a stable footing with full year profit forecasts expected to meet lowered expectations despite the continued significant weakness at Alton Towers since the crash on its Smiler ride in June.

Morrison Supermarkets continued to slide amid reports that it might lose its place on the FTSE 100 when the index updates its list on Wednesday.

Market Movers

FTSE 100 (UKX) 6,392.99 0.58%
FTSE 250 (MCX) 17,500.18 0.46%
techMARK (TASX) 3,225.87 -0.15%

FTSE 100 - Risers

Barclays (BARC) 232.05p 3.97%
TUI AG Reg Shs (DI) (TUI) 1,139.00p 3.36%
Royal Bank of Scotland Group (RBS) 312.00p 3.17%
Lloyds Banking Group (LLOY) 74.72p 2.41%
International Consolidated Airlines Group SA (CDI) (IAG) 579.00p 2.12%
InterContinental Hotels Group (IHG) 2,610.00p 2.11%
Berkeley Group Holdings (The) (BKG) 3,277.00p 2.06%
Merlin Entertainments (MERL) 417.30p 1.98%
HSBC Holdings (HSBA) 539.30p 1.85%
SSE (SSE) 1,458.00p 1.67%

FTSE 100 - Fallers

Babcock International Group (BAB) 1,046.00p -2.33%
Sage Group (SGE) 575.00p -1.96%
Morrison (Wm) Supermarkets (MRW) 150.20p -1.51%
Aberdeen Asset Management (ADN) 314.80p -1.44%
Glencore (GLEN) 95.36p -1.40%
BT Group (BT.A) 489.85p -1.33%
Sainsbury (J) (SBRY) 251.30p -0.99%
Old Mutual (OML) 207.10p -0.91%
Anglo American (AAL) 406.10p -0.62%
Shire Plc (SHP) 4,618.00p -0.60%

FTSE 250 - Risers

Drax Group (DRX) 253.60p 12.66%
Petra Diamonds Ltd.(DI) (PDL) 71.00p 10.68%
Tullow Oil (TLW) 207.70p 5.75%
Home Retail Group (HOME) 108.50p 5.44%
Poundland Group (PLND) 225.90p 4.73%
Acacia Mining (ACA) 179.40p 3.34%
Serco Group (SRP) 113.90p 3.08%
AA (AA.) 276.90p 2.56%
Pets at Home Group (PETS) 274.90p 2.54%
Countrywide (CWD) 401.80p 2.32%

FTSE 250 - Fallers

Sophos Group (SOPH) 262.10p -7.58%
SSP Group (SSPG) 301.10p -4.20%
CLS Holdings (CLI) 1,800.00p -2.70%
Marshalls (MSLH) 323.30p -1.73%
IP Group (IPO) 235.20p -1.63%
OneSavings Bank (OSB) 379.00p -1.48%
Card Factory (CARD) 363.80p -1.41%
Betfair Group (BET) 3,614.00p -1.34%
Keller Group (KLR) 818.50p -1.33%
Euromoney Institutional Investor (ERM) 918.00p -1.29%