London close: Stocks end higher after BoE announcement on leverage ratios

Banking stocks drove the FTSE to a strong finish on Friday after the Bank of England (BoE) unveiled softer-than-expected requirements for banks' leverage ratios and also thanks in part to an unexpected boost to stimulus from the Bank of Japan announced overnight.

The top tier closed the day 82.92 points higher, for a rise of 137.15 points for the week.

The leverage ratio, a key gauge of a bank's ability to cushion itself against losses, measures the proportion of the bank's lending that is funded by equity. It had been provisionally set at 3% under Basel's global rules but the Bank of England was widely expected to unveil stricter requirements.

However, chancellor George Osborne has urged the BoE to consider the impact which toughening the regulatory regime for banks would have on lending to households and business.

While he said he “fully accepts” the logic for an extra component to be added to the 3% level, the chancellor warned that work needed to be done on understanding what the impact might be on banks and large building societies.

Overnight, Japan’s Government Pension Investment Fund announced it will put half of its holdings in local and foreign stocks, doubling previous levels, and invest in alternative assets.

The Bank of Japan raised its annual target for monetary expansion to 80trn yen ($724bn) from 70trn yen.

Over in the States, the latest employment cost index was stronger than expected, rising 0.7% from the previous three months in the third quarter, exceeding analysts’ consensus of 0.5%, while the year-on-year increase came in at 2.2%.

Growth in wages and salaries printed at 0.8%, continuing the steady upward trend in place since the first quarter, when wages and salaries only increased 0.3% from the previous three months.

Meanwhile, the personal consumption expenditures price index rose 0.1% month-on-month on both overall and core measures, leaving the two parameters up 1.4% and 1.5% year-on-year, respectively.

Barclays and RBS rise after BoE unveils softer-than-expected requirements for leverage ratios

Banking stocks, already bolstered by stronger-than-expected quarterly results from RBS, received another big lift after the Bank of England unveiled its requirements for leverage ratios, which were softer-than-expected.

Barclays, which had been most at risk from the rule with the lowest leverage ratio among its peer group at just 3.5%, surged in response to the news, while RBS was hot on its heels.

Anglo-Spanish airline conglomerate IAG was also in demand as it reported a 30% jump in third-quarter operating profits on the back of falling fuel costs and lifted its guidance for full-year growth. It now expects full-year adjusted operating profits to grow €550m-600m over last year, compared with an earlier target for €500m growth.

Direct Line said it remains on track to hit its full-year targets, but noted "highly competitive" markets as gross written premiums fell 5% in the third quarter. The stock dropped firmly into the red after a positive start.

Gold stocks tracked the metal's price lower, with Randgold and Fresnillo both registering heaving losses.

Standard Chartered continued to decline amid recent reports US prosecutors have re-opened their investigations into whether the lender withheld information into the possible violation of the sanctions regime imposed on Iran.

Market Movers
techMARK 2,778.78 +1.05%
FTSE 100 6,546.47 +1.28%
FTSE 250 15,501.37 +1.33%

FTSE 100 - Risers
Barclays (BARC) 240.80p +8.20%
Royal Bank of Scotland Group (RBS) 388.00p +6.21%
International Consolidated Airlines Group SA (CDI) (IAG) 409.20p +4.74%
St James's Place (STJ) 745.00p +4.56%
ARM Holdings (ARM) 875.00p +4.35%
Schroders (SDR) 2,411.00p +3.43%
Rolls-Royce Holdings (RR.) 843.00p +3.37%
Kingfisher (KGF) 302.50p +3.10%
Friends Life Group Limited (FLG) 323.40p +3.06%
Aberdeen Asset Management (ADN) 434.00p +2.92%

FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 3,678.00p -2.67%
Fresnillo (FRES) 697.50p -2.65%
Direct Line Insurance Group (DLG) 276.00p -1.95%
TUI Travel (TT.) 398.60p -0.55%
Morrison (Wm) Supermarkets (MRW) 154.80p -0.51%
Standard Chartered (STAN) 939.60p -0.42%
Sainsbury (J) (SBRY) 245.50p -0.41%
Intertek Group (ITRK) 2,722.00p -0.40%
Capita (CPI) 1,097.00p -0.36%
BHP Billiton (BLT) 1,610.50p -0.31%

FTSE 250 - Risers
Regus (RGU) 197.30p +6.82%
Ashmore Group (ASHM) 318.60p +5.53%
Henderson Group (HGG) 210.80p +5.35%
Card Factory (CARD) 236.70p +4.87%
Hays (HAS) 123.30p +4.76%
Fidessa Group (FDSA) 2,341.00p +4.51%
Investec (INVP) 572.00p +4.09%
Mitchells & Butlers (MAB) 380.00p +4.05%
IP Group (IPO) 206.90p +3.45%
Smith (DS) (SMDS) 264.70p +3.36%

FTSE 250 - Fallers
Bwin.party Digital Entertainment (BPTY) 89.65p -10.22%
Centamin (DI) (CEY) 51.20p -6.65%
Supergroup (SGP) 830.00p -6.21%
EnQuest (ENQ) 69.40p -4.41%
African Barrick Gold (ABG) 206.00p -3.78%
Ophir Energy (OPHR) 185.30p -3.14%
Riverstone Energy Limited (RSE) 838.00p -2.56%
Stock Spirits Group (STCK) 305.00p -2.49%
Cairn Energy (CNE) 145.10p -2.42%
Hochschild Mining (HOC) 98.95p -2.32%