Sector movers: Volatility and rise in bond yields proves boon for banks

Banks paced gains as yields on longer-term government bonds continued to move higher on both sides of the Pond.

In parallel, the odds of a 25 basis point rate hike by the US Federal Reserve at its 14 December policy meeting moved up to 78.5%, according to the CME´s Fed Watch tool.

Thus, as of 1615 BST, the yield on the benchmnark 10-year Gilt was climbing 13 basis points higher to 1.28% - a fresh post-Brexit high - and that on similarly-dated 10-year US Treasuries by seven basis points to 1.86%.

Worth noting, on Thursday morning one oft-cited analyst had referenced remarks from European Central Bank chief Mario Draghi in the previous session as one trigger behind the previous day´s gain in yields.

Adding fuel to the proverbial fire, the UK´s gross domestic product expanded at a 0.5% quarter-on-quarter clip during the third quarter preliminary data from ONS revealed, easily outstripping projections for growth of 0.3%.

Better-than-expected quarterly figures from Barclays and Deutsche Bank also provided a boost for the sector.

Indeed, Barclays reported a 35% rise in third-quarter pre-tax profit to £837m as revenue from the fixed income division surged 40%. Excluding extraordinary items the lender posted quarterly profits of £1.7bn (consensus: £1.53bn).

In parallel, over on the Continent Deutsche Bank posted third quarter profits which rose to €278m following a loss of €6.1bn one year ago, driven by strong revenues from trading. That easily beat the average €610m loss forecast by analysts.

Shares in Lloyd´s also received a small boost after analysts at UBS nudged their target price on the stock from 65p to 67p while reiterating their recommendation to 'buy'.

On a more cautious note, according to the Financial Times the Bank of England has asked big UK lenders to detail their exposure to Deutsche Bank and some of the largest Italian banks, including Monte dei Paschi di Siena.

Going the other way were some of the more interest rate sensitive issues such as real estate investment trusts and fixed-line telecommunications.

Nonetheless, the worst performance was for oil equipment and service stocks which were torpedoed by a warning of higher year-end debt levels out of AMEC, with investors obviously displeased with the pace of the company´s restructuring.

Top performing sectors so far today
Banks 3,857.34 +1.00%
Media 7,276.74 +0.88%
Automobiles & Parts 7,357.89 +0.87%
Electronic & Electrical Equipment 5,081.13 +0.81%
Pharmaceuticals & Biotechnology 14,294.67 +0.81%

Bottom performing sectors so far today
Oil Equipment, Services & Distribution 15,069.64 -7.29%
Fixed Line Telecommunications 4,312.60 -2.61%
Real Estate Investment Trusts 2,738.16 -1.51%
Technology Hardware & Equipment 1,016.80 -1.23%
Support Services 6,831.80 -1.15%