Sector movers: Banks pace declines as rate cycle shifts

1st Aug 2024 14:34

(Sharecast News) - Lenders paced losses on the FTSE 350 with NatWest Group and HSBC leading decliners.

The drop in their shares followed a somewhat unexpected reduction in interest rates by the Bank of England.

Consensus had been divided going into the meeting but in the end the Monetary Policy Committee voted 5-4 to lower Bank Rate.

Nevertheless, rate-setters were very restrained in their comments, leading analysts to speculate that going forwards any further reductions might be quite gradual, possibly not more than once per quarter.

Worth noting in the case of HSBC, the night before rate-setters at the Federal Reserve had opened the door to a possible rate cut at September's meeting.

Some strategists, including at Barclays and BofA, had been warning that stocks in the US might be set to fall once the Fed actually began lowering rates.

The reason was that it would presumably signal that economic weakness and slower profit growth lay ahead.

Travel stocks were also under the cosh due to the renewed tensions in the Middle East following what appeared to be an Israeli strike against the political head of Hamas who was in Iran.

Going the other way, Financials did well on the back of solid results out of LSE Group and favourable comments out of JP Morgan on St.James's Place.

Defensives such as Tobacco and Pharma also fared well as longer-term government bond yields extended their declines after the BoE's decision.

Rolls Royce vaulted higher with the shares benefitting from what some analysts have dubbed a 'supercycle' for the engine maker's so-called aftermarket sales.

Top performing sectors so far today

Investment Banking and Brokerage Services 15,574.47 +3.57%

Tobacco 31,801.71 +1.58%

Aerospace and Defence 11,150.45 +1.31%

Pharmaceuticals & Biotechnology 23,118.81 +1.19%

Real Estate Investment Trusts 2,386.87 +0.64%

Bottom performing sectors so far today

Banks 4,240.29 -6.06%

Travel & Leisure 7,069.74 -3.08%

Industrial Engineering 13,341.64 -3.06%

Life Insurance 5,615.73 -2.98%

Electronic & Electrical Equipment 10,415.18 -2.74%