UK shares rose on Thursday, helped by stronger banking stocks and Centrica, although mining companies fell after the US Federal Reserve raised interest rates. The bluechip FTSE 100 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 and Randgold Resources, among the biggest fallers on the bluechip 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, BHP Billiton, Anglo American and Glencore 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 up 2 percent, and Royal Bank of Scotland and Barclays the biggest risers, up 4.4 percent and 3.4 percent respectively.
A US 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 was the biggest riser on the bluechip 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
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