Strong results from heavyweight bank HSBC helped British blue-chips hold on to gains on Monday, putting the index ahead for the month of July, though tobacco stocks tumbled further following a new US regulatory clamp down. The FTSE 100 rose 0.1 percent, and ended July 0.8 percent higher, outperforming European benchmarks which finished the month in the red. The mid-cap index was up 0.3 percent and made a monthly gain of 2.3 percent having ended June in the red - its worst month in a year.
HSBC shares pared gains to close 1.8 percent higher after Europe's biggest bank said profit grew 5 percent in the first half, and announced its third share buy-back in a year. "Beyond this buyback therefore, HSBC has $13 billion in capital above management's 13 percent CET1 target - a focus on the investor call we think, despite the obvious uncertainties of Brexit, IFRS 9 and so on," UBS analysts said. They also said their estimates already assumed another $2 billion buy-back will be announced at third-quarter results.
Rival Standard Chartered, which reports results on Wednesday, also rose 2.2 percent. Both banks' gains helped the FTSE banking index stay close to a two-year high. Cigarette makers Imperial Brands and British American Tobacco were still reeling from the US Food and Drug Administration's announcement on Friday that it would cut nicotine in cigarettes to non-addictive levels.
Imperial fell 5.9 percent, the FTSE's worst-performing large-cap stock, while BAT dropped 5 percent, together taking nearly 30 points off the index. The companies have lost 9 and 10 percent of their market cap respectively over two sessions. Analysts at Morgan Stanley said the new regulation looked "extremely ambitious, in many ways impractical." Deutsche Bank analysts said the dip in the shares could be a good buying opportunity.
A double upgrade from brokerage RBC boosted water utility Severn Trent to the top of the FTSE, up 4.1 percent. "As [water regulator] Ofwat improves clarity on returns and costs benchmarks, we believe SVT's position at the cost frontier and its ability to achieve incentives will be revealed," RBC analysts said. Rival United Utilities also jumped 3 percent after RBC upgraded it. "With low expectations more than priced in, UU has the biggest potential to surprise and represents the best value amongst its water peers," they said.
Miners underpinned recent gains as copper prices broke a two-year peak after strong manufacturing data from top commodity buyer China. Engine maker Rolls Royce fell 4.4 percent on reports the company had told investors it might not hit its target of 1 billion pounds in cashflow by 2020. A handful of mid-cap stocks led the STOXX 600. Indivior rose 4 percent, hitting a fresh record high after the FDA accepted a drug for treatment of opioid use disorder.
Online financial trading company IG Group also gained 3.6 percent. IT services firm FDM jumped 10.6 percent to a record high after reporting a 35.4 percent surge in first-half revenue. Underwriter Hiscox, meanwhile, fell 4 percent after its first-half results disappointed.