Sector movers: Banks slip as government bond yields fall back

(Sharecast News) - Stocks on the FTSE 350 were flattish on Thursday, surrendering earlier gains as Sterling jumped further following a speech from US Federal Reserve chairman Jerome Powell.

While Powell appeared to largely stick to his remarks from after the Fed's last policy meeting, when not completely, he did not explicitly push back against the recent easing in financial conditions.

Analysts at Rabobank were not completely on board with that notion, but foreign exchange markets appeared to be, with cable bolting higher by 1.65% to 1.2257 and the US dollar index again under pressure.

Linked to what was arguably the strapline of Powell's speech - 'higher for longer' - 10-year US Treasury yields continued to come under pressure and were likely dragging on similarly-dated Gilt yields and UK lenders' shares as well.

At last count, the yield on the benchmark 10-year Gilt was off by six basis points to 3.11%.

As an aside, as of the day before, analysts at Bank of America had penciled in US 10-year Treasury yields at 4.0% and 3.75% for the first and second quarters of 2023, whereas they were last trading nearer 3.5%.

Oil&Gas was also off at the start of December, as investors waited for clarity from the OPEC+ ministerial meeting at the weekend and from Brussels as regarded the European Union's price cap plan for Russian crude oil exports.

On that note, IG senior market analyst, Josh Mahony, told clients: "Unfortunately, the UK inflation picture is very different from the US, with double digit headline CPI meaning that the BoE will likely have to remain steadfast in their bid to drive down costs.

"Thus, while inflated wages and eventual rate cuts could bring a boom for the sector once inflation normalises, we appear to be entering a protracted period of house price weakness that the BoE will be unwilling to immediately remedy."

Homebuilders were also under pressure following the release of Nationwide's house price index for November, which revealed the largest drop in home prices since mid-2020.

"While many investors will have been busy celebrating the news that the Federal Reserve will look to tame their monetary tightening process, we are finally seeing the true implications of this spike in borrowing costs take hold," Mahoney added.

Going the other way, Automobiles & Parts caught a bid on news of further plans by officials in Beijing to ease their Covid-19 measures.

Top performing sectors so far today

Automobiles & Parts 1,357.63 +3.39%

Electricity 10,692.68 +2.25%

Life Insurance 6,738.47 +2.21%

Industrial Transportation 3,707.56 +2.16%

Electronic & Electrical Equipment 9,236.31 +1.91%

Bottom performing sectors so far today

Banks 3,212.19 -2.25%

Oil, Gas and Coal 8,357.49 -2.01%

Aerospace and Defence 4,897.08 -1.28%

Industrial Metals & Mining 7,786.87 -0.93%

Personal Goods 33,751.89 -0.47%