- FTSE 100 opens lower
- UK’s biggest banks pass stress test, capital requirements lowered
- US markets await fresh catalysts
- Oil extends gains
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“The FTSE 100 is struggling to find momentum in the early days of December – not so much a sign of weakness as a lack of catalysts to drive the next leg higher. Against that backdrop, UK banks are offering a dose of optimism this morning in what’s turning out to be a good couple of weeks for the major lenders.
The UK’s seven biggest banks sailed through the latest stress test, reaffirming their resilience and earning a regulatory nod to ease capital buffers. Most banks already hold capital well above the minimum by choice, so any shift in strategy may take time – but in theory, it frees up extra capital for lending or capital returns. However they use the new freedom, this is another clear signal that the UK banking sector is in robust health. This was largely expected, but the confirmation should still be taken well, especially after dodging tax hikes in last week’s Budget. UK banks have been on a tear over the past two years from deeply depressed levels – valuations aren’t as cheap anymore, but there are still some solid catalysts in play and the potential for strong shareholder returns ahead.
US markets slipped last night on light volumes, as investors seemed to be shaking off the weekend’s Thanksgiving celebrations. Futures point to a muted start again today, with US markets still hovering near record highs but lacking fresh catalysts. A quiet earnings calendar and sparse economic data keep the tone subdued, leaving investors looking ahead to Friday’s delayed PCE inflation report. With rate-cut odds for next week sitting at 86%, inflation data could be the spark everyone’s waiting for, if it’s supportive of further cuts.
Oil prices edged higher again this morning, extending recent gains as geopolitical tensions and supply risks dominate the narrative. Ukrainian strikes over the weekend damaged key infrastructure, while US–Venezuela tensions flared after Washington warned its airspace should be considered closed.”
