By Patrick Munnelly, Market Strategist, Tickmill
The FTSE was firmly in the green at the close on Wednesday up 1.83%.
Higher metal prices
The positive momentum today was driven by higher metal prices, which lifted mining stocks. Industrial metal miners benefitted from a 0.8% gain as prices of most base metals rose, supported by a weaker US dollar, Antofagasta LON:ANTO +5.5% sits at the top of the board with Glencore LON:GLEN following closely behind, gaining 4.87%.
Bank of England stress test
Additionally, British banks saw gains after successfully clearing the Bank of England’s stress test, with results released this morning, indicating that the eight major lenders assessed would be capable of withstanding a stressed environment with rising interest rates. The test further revealed that none of the banks would need to submit revised capital plans, reinforcing their financial strength and ability to handle adverse scenarios. By the close Natwest LON:NWG was up 3.5% and Barclays LON:BARC up 3.3%.
The miners took the top spots but Smurfit Kappa [LON:SKG] was up 4.41% as investors cheered the opening of their first North African plant and the announcement that the largest paper and packaging firm intends to expand their North African presence.
On the negative side of the ledger IAG LON:IAG sits at the bottom of the index shedding 2.2% on the session after being downgraded by Deutsche Bank. The German investment bank moved its rating to ‘Hold’ from ‘Buy’ as it cut price targets across the European airlines sector. Analyst Jamie Rowbotham said: “We have seen some weakness in our fares data, with 60-day out prices for travel in August having screened ~2% down year over year on average, and walk-up fares in June ~6% down.”
He said while the idea of a slowdown did not resonate with the airlines in recent pre-close conversations, “we are nonetheless exercising some caution.”
For 2023, the bank has trimmed forecasts for the September quarter more than offset by upgrades to the June quarter and thinks assumptions for the December quarter are sufficiently prudent.
For 2024, however, Deutsche predicts fares will fall 6% year-on-year versus flat before. This has “resulted in a material cut to our profit forecasts which now sit ~20% below consensus on average.” Deutsche has lowered its share price target for IAG to 165p from 200p
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