Sector movers: Banks benefit as summer drop in yields unwinds

Longer-term sovereign bond yields continued to rebound sharply, to the benefit of bank shares both sides of the Pond.

On the flip side, rate-sensitive construction and real estate stocks were knocked lower.

The European Central Bank surprised some market observers in the previous session after it opted not to extend the length of its asset purchase programme.

Stoking the rise in yields, towards mid-afternoon the president of the Federal Reserve bank of Boston, Eric Rosengren, told an audience Stateside that the risks for the US economy's outlook were "increasingly two-sided".

To take note of, perhaps, earlier in the day analysts at Deutsche Bank called attention to a late addition to the list of Fed speakers for the following week.

Fed governor Lael Brainard had now been scheduled to speak on 12 September, just before the start of the Fed's so-called 'black-out' period ahead of tist 20-21 September policy meeting.

"Despite market pricing being at 28% for a Fed hike this month it was interesting to read last night that DB's Peter Hooper thinks it's much closer to 50/50 than the market believes. Peter thinks a very recently added speech for this coming Monday - the day before the FOMC blackout - from the dovish Brainard may have been set up as a way to raise market expectations. There are other Fed speakers scheduled ahead of the blackout but Peter thinks hawkish comments from the normally dovish Brainard could set the scene for more aggressive hike pricing. So one to watch at the very least," Deutsche Bank's Jim Reid said in a research note sent to clients.

As of 1553 BST Fed funds futures were pricing in 60.9% probability that the US central bank might raise interest rates by 25 basis points at its 15 December policy meeting, according to the CME's Fed Watch Tool.

Shares in the main grocers also weighed on the market after The Serious Fraud Office charged three former Tesco executives with fraud as part of its investigation into a scandal that resulted in a £263m black hole in the retailer's accounts.

Top performing sectors so far today
Banks 3,670.51 +0.90%
Industrial Metals & Mining 1,374.88 +0.07%
Alternative Energy 0.00 0.00%
Alternative Investment Instruments NULL 0.00%
Automobiles and related providers NULL 0.00%

Bottom performing sectors so far today
Construction & Materials 6,061.12 -2.80%
Food & Drug Retailers 2,695.88 -2.51%
Household Goods & Home Construction 16,428.99 -2.42%
Support Services 7,217.21 -2.15%
Real Estate Investment Trusts 2,955.05 -2.12%