Sector movers: Utilities climb as Italy hits yields, banks and insurers in the red

Utilities were bubbling up again on Friday, while insurers and banks were taking losses.

Utilities, which are treated by many investors as proxies for bonds, were boosted as government bond yields fell as markets reacted to the Italian government's new budget plans. Italy's target of 2.4% of GDP deficit for 2019 to 2021 has raised tensions with Brussels, which wants borrowing to be lowered by 0.6 percentage points, prompting fears of a fresh debt crisis.

Yields in Italy surged, sending yields in Germany falling due to investors moving to safer havens, with the spread between 10-year government bonds from Germany and Italy widening to around 270 basis points from 235bps the day before. US yields fell a little also.

United Utilities, Pennon, National Grid, Centrica and Severn Trent, all bond proxies due to their sizeable, safe and predictable income, were all in the green.

UU also put out a trading statement, saying its revenue had increased in the first half of the year but that it had to make some one-off investments to cope with the long, hot summer.

Financial stocks were also hit by Italian concerns, with Italy's biggest banks Intesa Sanpaolo and UniCredit 8% and 7% respectively, with analysts and economists talking of contagion to other European banks.

Hitting British banks too was gross domestic product growth data from the Office for National Statistics, which was confirmed at 0.4% for the second quarter but first-quarter growth was revised down to 0.1% from 0.2%. The composition of growth also painted a rather less healthy picture, including business investment down 0.7% in the second quarter.

With the possibility of a “no deal” Brexit still hanging over the economy, consumers’ finances still under pressure and both investment and exports showing the strain from Brexit, economist Sam Tombs at Pantheon Macroeconomics said it "remains unlikely" that the economy will be strong enough for the Bank of England to seriously consider raising interest rates again before the March 2019 deadline for Brexit.

Hitting the insurance sector was an early update from RSA Insurance, which revealed poor UK underwriting results that drove a disappointing overall third quarter, despite reporting a strong quarter for its international businesses. Net written premiums for the third quarter were up 4% year-on-year but large and weather losses were above expected levels in the quarter and particularly elevated in the UK.

Analysts at Panmure Gordon said the reasons appear to be higher weather, large losses and attritional claims. On the fact that the press release was brought forward, they assumed that full year consensus earnings at 47-48p "are at least 10% too high".

Panmure added: "RSA is a well-run business and non-life insurers will of course be subject the large weather losses from time to time. Although the share price has come off summer highs were we viewed them as being priced for perfection, we still think that they are fully valued...The key question will be the dividend where there is a wide range of estimates based on the assumption that a special dividend will be paid in addition to a normal."

Top performing sectors so far today

Technology Hardware & Equipment 1,064.77 +4.17%
Gas, Water & Multiutilities 4,796.82 +1.34%
Industrial Transportation 3,237.39 +1.02%
Aerospace and Defence 5,506.42 +0.89%
Industrial Metals & Mining 5,150.24 +0.74%

Bottom performing sectors so far today

Leisure Goods 9,440.45 -4.18%
Insurance (non-life) 3,237.90 -3.16%
Mobile Telecommunications 3,678.11 -2.07%
Fixed Line Telecommunications 2,606.50 -2.03%
Banks 4,015.08 -2.00%

Market Movers

FTSE 100 (UKX) 7,525.28 -0.27%
FTSE 250 (MCX) 20,343.22 -0.15%
techMARK (TASX) 3,511.04 -0.17%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 5,446.00p 3.54%
Next (NXT) 5,506.00p 3.26%
Micro Focus International (MCRO) 1,430.50p 3.17%
Rolls-Royce Holdings (RR.) 989.20p 2.40%
Fresnillo (FRES) 821.20p 1.96%
United Utilities Group (UU.) 703.80p 1.53%
Reckitt Benckiser Group (RB.) 7,038.00p 1.51%
National Grid (NG.) 790.60p 1.36%
Compass Group (CPG) 1,710.00p 1.27%
Relx plc (REL) 1,612.00p 1.16%

FTSE 100 - Fallers

RSA Insurance Group (RSA) 574.80p -9.34%
Melrose Industries (MRO) 201.10p -2.66%
Lloyds Banking Group (LLOY) 59.46p -2.52%
Ocado Group (OCDO) 896.80p -2.50%
Paddy Power Betfair (PPB) 6,535.00p -2.46%
Standard Life Aberdeen (SLA) 307.10p -2.26%
Barclays (BARC) 172.72p -2.24%
Vodafone Group (VOD) 164.58p -2.12%
Royal Bank of Scotland Group (RBS) 250.20p -2.11%
Just Eat (JE.) 674.00p -2.09%

FTSE 250 - Risers

Serco Group (SRP) 98.30p 11.33%
888 Holdings (888) 200.60p 5.47%
TBC Bank Group (TBCG) 1,688.00p 4.20%
Hochschild Mining (HOC) 163.30p 3.98%
Kaz Minerals (KAZ) 551.00p 3.49%
Wizz Air Holdings (WIZZ) 2,871.00p 3.31%
Centamin (DI) (CEY) 106.25p 2.76%
Halfords Group (HFD) 318.40p 2.64%
BBA Aviation (BBA) 300.40p 2.53%
Premier Oil (PMO) 139.10p 2.28%

FTSE 250 - Fallers

AA (AA.) 95.60p -6.55%
Thomas Cook Group (TCG) 58.25p -4.82%
Games Workshop Group (GAW) 3,780.00p -4.30%
Sirius Minerals (SXX) 28.15p -4.18%
Quilter (QLT) 134.88p -3.79%
Travis Perkins (TPK) 1,068.50p -3.65%
Plus500 Ltd (DI) (PLUS) 1,336.00p -3.47%
Provident Financial (PFG) 605.00p -3.29%
Spire Healthcare Group (SPI) 142.70p -3.25%
Investec (INVP) 540.80p -2.94%