Sector movers: Banking, resource stocks pull London Market higher

Banking and natural resource stocks pulled the London market higher on Tuesday, on the back of modest upticks in commodity prices and the Bank of England giving UK banks a clean bill of health.

The FTSE 100 closed 0.62% or 39.56 points higher at 6,395.65, while the FTSE 250 ended up 0.55% or 96.06 points higher at 17,516.76 as selected metal futures traded higher.

The biggest risers came from the banking sector after all seven of Britain's largest banks passed stress tests by the Bank of England, with Governor Mark Carney assuring that no new wave of higher capital requirements was incoming.

Investors took confidence from 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.

While all banks passed the main stress test scenario of weathering a theoretical deterioration in global economic conditions, the Royal Bank of Scotland failed to meet its individual capital guidance requirements and Standard Chartered failed to reach its so-called Tier 1 minimum capital requirement of 6%.

However, both lenders have strengthened sufficiently since to pass muster. Capital was considered to be adequate at the other five lenders included in the tests: Barclays, HSBC, Nationwide Building Society, Lloyds and Santander UK. In wake for the review, Barclays (up 4.61%) and Royal Bank of Scotland (up 3.24%) led the FTSE 100 higher.

Meanwhile selected metal futures registered gains in late afternoon trading in Europe triggering an uptick in resource stocks. At 1635 GMT, three-month delivery contracts of lead (up 0.7%), nickel (up 0.3%) and primary aluminium (up 1.1%) saw decent upticks on the London Metal Exchange.

The copper contract, still at historic lows, also managed a modest 0.6% uptick to $4,622.00 per metric tonne as Chinese copper producers agreed over the weekend to cut refined production by 200,000 metric tonne in 2016.

Precious metals also saw marginal upticks with COMEX gold futures up 0.09% or $1.20 to $1,064.10 an ounce, while spot gold was 0.06% or 69 cents higher at $1,065.46 an ounce. COMEX silver was up 0.06% or a cent to $14.10 an ounce, while spot platinum was up 0.51% or $4.28 to $835.58 an ounce.

Subsequently, Randgold Resources (up 2.60%) found itself among the biggest blue chip gainers, while Petra Diamonds (up 12.63%), Tullow Oil (up 5.19%) and Acacia Mining (up 5.18%) led the resource driven charge for the midcaps. However, Glencore (down 2.31%), Weir Group (down 3.74%) and Premier Oil (down 2.46%) were among the resource stocks to trade lower for much of the session.