LONDON MARKETS: U.K. Stocks Log Slight Gains As Bank Shares Rally On Interest-rate Hopes
By Sara Sjolin and Carla Mozee, MarketWatch
RBS, however, underperforms bank sector following downgrade
The U.K. stock market posted slight gains in muted action on Thursday, although banks shares proved a standout, finishing higher on hopes of a lift in interest rates in the U.K. and the U.S.
Shares of Barclays PLC (BCS) (BCS) closed up 1%, Standard Chartered PLC (STAN.LN) picked up 1.1% and HSBC Holdings PLC (HSBA.LN) (HSBA.LN) (HSBA.LN) tacked on 0.2%.
The benchmark FTSE 100 index closed up 0.1% at 7,322.82 after a choppy session.
Rate route: The positive moves for the sector came after the Bank of England's Chief Economist Andy Haldane late Wednesday in a Sky News interview (http://news.sky.com/story/interest-rate-rise-should-not-be-feared-says-bank-of-england-economist-11056411) said Brits should not fear higher interest rates, sparking speculation that the first rate hike in a decade is imminent. A rate hike would be a "good news story" for the U.K. economy as it would reflect improvement, he said.
Haldane also reiterated the message from the BOE's September meeting that "we could be nearing the point where a reduction in some degree of monetary stimulus might be warranted in the coming months."
Higher rates tend to boost the banking sector as it means banks can charge more for their loans. Across the pond, expectations for a rate hike in 2017 are also up after Federal Reserve Chairwoman Janet Yellen said this week it would be "imprudent" to leave monetary policy on hold for too long. That helped push U.K. bank stocks rise during Wednesday's session.