Bank stocks managed to swim against the tide of a falling stock market on Tuesday as investors played it safe ahead of the U.S. central bank’s policy decision announcement scheduled for the following day.
Until June 10, financial markets were very confident that the Federal Reserve would only increase the target range for the federal funds rate by 50 basis points.
However, the release of a stronger-than-expected reading on consumer price inflation on June 9, followed by survey data showing a further rise in U.S. consumer inflation expectations the next day, led some economists to posit that perhaps the Fed should “surprise” the markets with a larger hike to help ensure that inflation expectations remain well anchored.
HSBCwhich is highly interest rate sensitive in the United States, was among the main winners, along with Asia-focused companies StanChart the shares of both rose by around 3.5%.
The latter also benefited from an upward revision of target prices by analysts to Bank of America from 750.0p to 780.0p following a positive trade update from the lender.
Following this update, BofA revised its StanChart Capital Markets revenue estimate for 2022-24 upward by $100 million per year.
The broker also raised its net interest income estimates from the same lender to reflect rising yield curves for a total increase of $0.05 in earnings per share in 2023-24.
Close the group of brothers was another top gainer, up 3% after RBC Capital Markets upgraded the stock from ‘sector performance’ to ‘outperformance’, indicating to clients that the bank’s valuation now offered a good entry point.
Lloyd’s and Natwest Group equities added around 1% each and those of Barclays added 0.5%.
Best performing sectors to date
Banks 3,199.95 +2.48%
Household goods and construction of houses 12,912.16 +2.25%
Oil, Gas and Coal 7,900.16 +1.22%
Aerospace and Defense 4,736.58 +1.02%
Tobacco 36,585.57 +0.96%
Worst Performing Sectors So Far Today
Leisure goods 15,189.52 -5.07%
Electricity 10,132.08 -3.59%
Industrial transport 2,854.21 -3.26%
Chemicals 11,193.95 -2.82%
Precious metals and mining 10,164.85 -2.77%