Britain’s top share index closed higher yesterday following a rally in banking and mining stocks, although a slump in utilities kept a lid on broader market gains.
The blue-chip FTSE 100 index closed up 0.34% at 6,753.18 points after earlier rising as high as 6,814.19.
Utilities stocks, seen as bond-proxies, were the worst hit by higher bond yields prompted by the risk of faster inflation and wider budget deficits if president-elect Donald Trump pursues a US infrastructure spending spree.
“Selling pressure in bonds will persist following Trump’s victory and his pledge to spend heavily on infrastructure projects,” Secure Equity senior trader Jawaid Afsar said. “It will continue to prompt a rotation out of defensives into financials and miners for some time.”
Severn Trent fell 3.8%, the worst performer in the FTSE 100 index, while shares in SSE, United Utilities and National Grid dropped by between 2.8% and 3.2%.
Russian gold and silver miner Polymetal fell 4.9% following a drop in gold prices.
Banks were in demand on hopes of a relatively lighter regulation in the US and expectations that a rise in inflation could prompt the US Federal Reserve to be aggressive in raising interest rates.
The UK banking index rose 2.7%, helped by a 2.4 to 5.2% rise in shares of Barclays, Royal Bank of Scotland and HSBC.
Miners were also in demand on expectations that Trump’s plans to spend $1tn in infrastructure projects over a decade could boost demand for metals.
The UK mining index was up 1.6% as shares in BHP Billiton, Rio Tinto and Anglo American rose 2.3 to 2.8%.
Sharp moves in some stocks also supported the market.
Housebuilder Taylor Wimpey climbed 3% after saying it expected an increase in full-year operating profit margin, adding that trading had remained resilient following Britain’s vote to leave the European Union.
“Taylor Wimpey’s plans for 2016 have not been derailed by this year’s political events and the forward orderbook suggests that profits will grow further in 2017,” analysts at Jefferies said in a note, adding that Taylor Wimpey was their top pick among the housebuilders they covered.
Support services firm DCC rose 2.8% after saying it expected full-year profit to come in ahead of expectations.
Beyond the blue-chips, Greencore Group rose 9.5% after saying that it planned to buy US convenience food manufacturer Peacock Foods for $747.5mn in a bid to transform its US business.