Banks helped to support British bluechips on Thursday, buoyed by good performance from US lenders in key business areas on a volatile day as the European Central Bank held policy steady. British mid-caps were also in focus, hobbled as the FTSE 250 was hit by a series of profit warnings. The FTSE 100 ended up 4.98 points, or 0.1 percent, at 7,026.90, following a volatile session.
Top risers were Royal Bank of Scotland and Barclays, up 3.5 and 3.2 percent respectively. Traders said good results from US banks were helping the sector, especially lenders such as RBS and Barclays that have substantial Fixed Income, Currency and Commodity (FICC) trading operations. Analysts at J.P. Morgan Cazenove said it expected "this trend of FICC outperformance ... to continue" in the European earnings season, and cited Barclays as a stock which would benefit.
On Thursday, BNY Mellon was the latest in a series of US banks to post expectation-busting results. "US bank earnings have been good. That's removed some of the worries over continued low rates. As long as there's an investment bank business behind you, that's where the performance is," said Zeg Choudhry, managing director of broker LONTRAD. "Barclays is favoured because of its investment banking business."
Volatility in afternoon trade was exacerbated by a meeting of the European Central Bank. The ECB kept rates steady as expected, and trade was choppy after ECB President Mario Draghi said the central bank had not discussed at its latest meeting either ending its asset-buying programme, also known as quantitative easing, or extending it. Shares dropped initially, but recovered following a fall in the euro and bonds yields as Draghi struck a more dovish tone.
The mid-cap FTSE 250 fell 0.5 percent, hit by profit warnings. Cyber security company NCC plummeted 35 percent, its biggest-ever daily decline after it faced some contract cancellations and difficulties with some renewals. Mid-cap engineering companies Keller and Senior slumped 27 percent and 20 percent respectively after both issued profit warnings .
Among bluechips, WPP fell 3.6 percent after Publicis Groupe, down 5.7 percent, said third-quarter sales grew by just 0.2 percent on an organic basis following the loss of large media accounts in the United States in 2015. Concern about advertising revenues hit British broadcaster ITV as well, with its shares down 3 percent after broker Liberum cut its target price for the stock. However, airline stocks found some solid ground after German airline Lufthansa, up more than 7.9 percent, increased its profit target for the year. Shares in British Airways owner IAG, easyJet and Ryanair rose 0.9 to 3.4 percent.