LONDON (Reuters) - The FTSE 100 rose on Tuesday, as traders bought up beaten-down financial heavyweights in a cautious session ahead of a policy meeting of the U.S. Federal Reserve.
The FTSE 100 closed 43.72 points higher, or 0.7 percent, at 6,374.21, with financials, which include banks, asset managers and insurers, contributing 24 points to the advance.
HSBC and Standard Chartered rose 2.2 percent and 1.8 percent respectively, after having fallen more than 11 percent in the last month, benefiting from positive comment by Citigroup.
HSBC alone accounted for 10.7 points of gains, as the FTSE 100’s second biggest company was raised to “buy” from “neutral” by Citigroup, while the note reiterated a “buy” rating on Standard Chartered.
Lloyds and Royal Bank of Scotland also saw strong gains, receiving positive comment from Aviva ahead of a speech by the British Chancellor on Wednesday expected to outline their return to full private ownership.
“HSBC got an upgrade, and they’ve been very oversold recently, so that’s helping them up,” Zeg Choudhry, head of equities trading at Northland Capital Partners, said. He said there was a lot of supportive news at the moment for UK banks, pointing to Lloyds’ returning to profitability, private ownership and dividend payments too.
Non-bank financials were also buoyant, with insurer RSA gaining 2.2 percent after being raised to “outperform” from “neutral” by Credit Suisse.
Whitbread was the top individual gainer, up 3.6 percent after the owner of the Costa Coffee chain and Premier Inn hotels posted an acceleration in sales growth in the first quarter.
Volumes on the FTSE 100 were light, with traders unwilling to commit to firm positions ahead of the results of the Fed meeting on Wednesday.
Monetary stimulus has helped propel equity markets towards multi-year peaks this year, but the FTSE 100 has fallen 7.5 percent from 13 year highs after Fed officials openly pondered exit strategies from their monetary stimulus programme.
Tuesday saw volume of just 78 percent of the 90 day average.
Despite uncertainty over the Fed’s next move, Britain’s top share index looks set to rise 6 percent from now until the end of 2013 as confidence in the global economy improves, according to a Reuters poll, hitting 7,00 by this time next year.
“I think we’re definitely headed to 7,000. We could have short term turbulence but the last quarter of this year should be extremely bullish,” Choudhry said.
Editing by Jane Merriman