Hargreaves Lansdown

Sector movers: HSBC lead banks higher after US unit passes stress tests

Thu 29 June 2017 12:17 | A A A

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(ShareCast News) - Banks pushed higher, tracking gains in their North American peers overnight on the heels of the latest US central bank stress test results and as government bond yields around the world continued their march higher.

HSBC and Barclays were doing best as of 1347 BST, with shares of the latter also helped by an upgrade out of analysts at Morgan Stanley.

Morgan Stanley predicted the debate around the lender would swing from questions about the sustainability of its dividend to how it should go about deploying its excess capital.

"We see actions to control risk weighted assets as an underappreciated driver of capital build and see room for a 20% cash yield over the next three years - upgrade to Overweight," analysts at Morgan Stanley said.

Bolstering the broker's arguments, overnight HSBC's North America unit passed the Federal Reserve's so-called 'stress tests', meaning it did not need to strengthen its capital buffers further if it did not wish to do so.

It also opened the way for it to potentially return cash to shareholders.

Indeed, other analysts expressed similar views to those of Morgan Stanley's highlighting the group's then current dividend yield of approximately 6%.

For the first time since the Federal Reserve began conducting the tests in 2008, every lender passed, sending the KBW bank sector index 1.67% higher on Wednesday evening.

Acting as a backdrop, recent somewhat more hawkish comments from officials at the Bank of Canada, Bank of England and, arguably, the European Central Bank had boosted speculation that the global interest rate cycle might also be shifting - although in the case of the ECB quite a few analysts remained unconvinced.

Industrial metals and mining firms were again higher on Thursday too, as those same expectations for tighter monetary policy outside the US weighed on the greenback, boosting commodity prices.

Top performing sectors so far today

Banks 4,441.82 +3.31%

Industrial Metals & Mining 2,437.48 +3.20%

Mining 14,816.66 +1.86%

General Industrials 6,020.12 +0.95%

Real Estate Investment & Services 2,731.06 +0.62%

Bottom performing sectors so far today

Electronic & Electrical Equipment 5,819.92 -1.87%

Oil Equipment, Services & Distribution 12,001.03 -1.70%

Automobiles & Parts 7,647.81 -1.51%

Industrial Transportation 3,065.42 -1.38%

Software & Computer Services 2,068.63 -1.29%

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