Sector movers: Interest-rate sensitive electricity stocks pace gains

Interest rate-sensitive issues were on the front foot amid a sharp drop in government bond yields following the release of a mixed report on the state of the US jobs market in November.

US non-farm payrolls increased by 178,000 last month, slightly less than the 180,000 which economists had been expecting. However, average hourly earnings in fact dipped by 0.1% month-on-month, instead of rising by 0.2% as markets had anticipated.

That sent the yield on the benchmark 10-year Gilt down by 11 basis points to 1.39%.

Against that backdrop, UBS analyst Sam Arie pointed out how bond yields were still far below their average levels seen over the past 10 years, while the valuation of European utilities was largely in line with its average over that same time period.

Offering a 5.3% dividend yield and trading on 7.2 times enterprise value on average, "on this basis the sector is indeed starting to look cheap...," he said.

At the individual company level, Arie highlighted how SSE was sporting a dividend yield of 6.4% while Centrica´s was at 6%.

He added: "At <210p and yielding 6% we remain buyers of CNA and do not believe further policy intervention in the UK market will be easy or quick."

In parallel, Morgan Stanley told clients it preferred SSE to rival Centrica.

Top performing sectors so far today
Electricity 8,595.02 +1.25%
Fixed Line Telecommunications 4,066.16 +1.08%
Real Estate Investment Trusts 2,685.08 +0.95%
Tobacco 49,793.55 +0.74%
Industrial Transportation 2,970.66 +0.66%

Bottom performing sectors so far today
Technology Hardware & Equipment 939.10 -6.67%
Industrial Metals & Mining 2,247.48 -6.63%
Aerospace and Defence 4,603.83 -2.02%
Mining 14,447.83 -2.00%
Oil & Gas Producers 7,717.81 -1.79%