December 15, 2016 / 10:23 AM / a year ago

FTSE ends higher led by banks, Centrica

LONDON (Reuters) - UK shares rose on Thursday, helped by stronger banking stocks and Centrica (CNA.L), although mining companies fell after the U.S. Federal Reserve raised interest rates.

The blue chip FTSE 100 .FTSE index ended up 0.7 percent.

The Fed hiked interest rates by 25 basis points on Wednesday and signalled an accelerated pace of increases in 2017.

The move weighed on shares of precious metals miners Fresnillo (FRES.L) and Randgold Resources (RRS.L), among the biggest fallers on the blue chip index, down 5.5 percent and 7.9 percent respectively after the price of gold fell to its lowest in over 10 months because of a firmer dollar.

Similarly shares in miners Antofagasta (ANTO.L), BHP Billiton (BLT.L), Anglo American (AAL.L) and Glencore (GLEN.L) came under pressure from dollar strength, which makes the cost of greenback-denominated underlying commodities more expensive to holders of foreign currency.

UK banks, however, rose, with the FTSE 350 banking index .FTNMX8350 up 2 percent, and Royal Bank of Scotland (RBS.L) and Barclays (BARC.L) the biggest risers, up 4.4 percent and 3.4 percent respectively.

A U.S. rate increase is considered a positive for banks, which have struggled in a low-rate environment.

“Rising interest rates are generally quite good for banks, depending on their specific situation, but in general they are sitting on large deposit bases and they can make a bigger spread as interest rates go up,” Simon Gergel, CIO of UK Equities at Allianz, said.

    Centrica (CNA.L) was the biggest riser on the blue chip index, gaining 5.6 percent and touching a 2-month high after the utility lifted its full-year guidance on better-than-expected cost savings and a strong trading performance in a volatile market.

    Among the midcaps, Just Eat <JE.Lto hit an all-time high after agreeing to buy its main UK rival hungryhouse, an online food company, for an initial consideration of 200 million pounds ($248.02 million). Its shares pared gains to end up 0.4 percent.

    The online food delivery company also agreed to buy SkipTheDishes in Canada.

    “Intuitively, we are positive on the transaction, consolidation is a good thing in online marketplace models whatever the vertical,” analysts at Jefferies said in a note.

    “This deal not only consolidates the UK effectively, it also removes the possibility of a more radical combination for HH (hungryhouse).”

    Reporting by Kit Rees; Editing by Janet Lawrence

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