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Banks lift FTSE after debt rules eased

Banks lift FTSE after debt rules eased

Banking shares ensured a cheerful start to the week for Britain’s FTSE 100, gaining after global regulators diluted a planned debt limit for banks.

The move to adjust the ‘leverage ratio’ by the Basel Committee on Banking Supervision at a meeting in Switzerland on Sunday comes after intense lobbying from bankers.

Barclays (BARC.L) was the biggest beneficiary, up 2.5% to 290p, which analysts said was because the changes were likely to be most beneficial to investment banks.

Royal Bank of Scotland (RBS.L) rose 2% to 363p and Lloyds (LLOY.L) was up 1.5% at 84p.

The overall mood in London was cautious after Friday’s surprise set of numbers on the US labour market. The US nonfarm payrolls report showed a gain of 74,000 jobs, less than half that expected, while the unemployment rate dropped to 6.7%, the lowest since October 2008. The FTSE 100 rose 0.1% to 6,749.

Morrisons (MRW.L) also provided some support for the blue chip index, rising 3.3% to 244p amid reports that the supermarket group is considering selling up to 10% of its properties.

Clive Black, an analyst at Shore Capital had his doubts about such a sale: ‘Whilst there can be short-term gains for shareholders from a comprehensive property sale programme through distributions, we question whether such activity is in the interest of the company in the long-run; will the shareholders that may seek short-term radical action be there for the duration?’ he questioned.

Royal Mail (RMG.L) slipped back 0.4% to 580p after two announcements; firstly, price hikes for businesses; and secondly, the replacement of Mark Higson by Sue Whalley, who becomes chief operations officer.

Royal Mail remains a ‘buy for Alex Paterson, an analyst at Espirito Santo. ‘We believe RMG's announcements are sensible and may limit the potential impact of end-to-end competition, one of our key highlighted risks,’ said Paterson.

Debenhams (DEB.L) was the top gainer among mid-cap stocks, rising 4.3% to 85p on the news that Sports Direct (SPD.L) has snapped up a 4.6% stake in the department store.

Though further bid speculation could support Debenhams shares, said Liberum analyst Sanjay Vidyarthi, he did not see the rationale for the deal for the department store. ‘Our view on Debenhams (Sell, 65p TP) is that, given little room for manoeuvre on costs or gross margin, management does not have many options other than to continue with its sales-driven recovery strategy,’ he concluded.

Homeserve (HSV.L) investors breathed easier after the home repair and insurance group was hit with a fine of £34.5 million from the UK City regulator. Though the levy for mis-selling was £30 million bigger than expected, the company said ‘business continues to trade in line with expectations’ and investors welcomed the removal of regulatory uncertainty.

Homeserve shares climbed 3.5% to 292p.

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