Britain's FTSE enjoys best day of 2017 as oils and banks rally

Fri, 03rd Feb 2017 16:56

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* FTSE 100 closes 0.7 pct higher

* Oils, banks among top risers

* Miners slump as metals prices slip

By Kit Rees and Atul Prakash

LONDON, Feb 3 (Reuters) - Britain's top share index climbedto a one-week high on Friday and recorded its best one-day riseso far this year, with a rally in energy and banking stockseclipsing weaker miners.

Energy shares were supported by a rise in oil prices amidspeculation about possible new sanctions on Iran after U.S.President Donald Trump said "nothing is off the table" inresponse to Tehran's test launch of a missile.

The UK oil and gas index rose 1.3 percent,boosted by increases of 1.2-3.0 percent in shares of Royal DutchShell, Tullow Oil and BP.

However, investors stayed cautious as experts said areversal of U.S. transparency requirements for the industrycould give American oil firms an edge over European rivals,which face some of the toughest rules in the world.

Financials were in demand. UK banks rose 1.6percent, with analysts citing renewed positivity around thesector following last year's broader "reflation trade", whichpicked pace after the election of U.S. president Donald Trump.

"Generally investor sentiment around the banks, especiallywith Donald Trump coming in, is starting to improve," JonathanRoy, investment manager at Charles Hanover Investments, said,adding the fact UK bank stocks had eased over the course of theweek had brought them down to more attractive levels.

Barclays and Royal Bank of Scotland rose3.4 percent and 2.7 percent respectively.

Financials also got support as Trump prepared to scale backthe Dodd-Frank Wall Street reform law, which was enacted in thewake of the 2007-09 financial crisis.

"Since Dodd Frank was introduced, banks have devoted a lotmore capital towards compliance and have had to decreaseleverage, both of which are a direct hit to profitability,"Jasper Lawler, senior analyst at London Capital Group, said.

"If Dodd Frank is watered down, that's a direct boost to thebottom line for banks. Barclays and RBS are top of the FTSE."

The blue-chip FTSE 100 closed 0.7 percent higher at7,188.30 points, the biggest one-day percentage rise so far thisyear. The index hit an intra-day peak of 7,202.37 points, thehighest since Jan. 25.

The index, dominated by internationally-exposed firms, wasalso helped by a weaker sterling, which tumbled on Thursdayafter the Bank of England appeared to be in no rush to tightenmonetary policy. Sterling fell further on Friday.

The broader stock market extended gains afterbetter-than-expected U.S. jobs data masked underlying weaknessin wage growth that may keep the Fed from raising rates nextweek.

Among smaller British firms, mid-cap Beazley closed6.4 percent higher after hitting a record high as the insurer'sprofit beat expectations. Fellow blue-chip insurers Prudential and Admiral rose 3.1 percent and 2.3 percentrespectively.

However, miners hindered the broader market rally.

The UK mining index fell 3.2 percent as metalsprices retreated, with copper on the backfoot after Chinaspooked metals markets by raising interest rates. Glencore, Rio Tinto, and Antofagasta fell by3.3-4.8 percent. (Reporting by Kit Rees; Editing by Mark Potter)