FTSE On An Uptick; RBS Fails Stress Test

ftse

The UK stock index finished with an uptick on Thursday, with oil-backed equities soaring in expectations of a successful OPEC production cut deal. On the other hand, after failing the stress test given by the Bank of England, the stocks of the Royal Bank of Scotland PLC dropped.

The FTSE 100 was up 0.6 percent at 6,811.95 following a drop of 0.4 percent on Tuesday, its second consecutive decline.

As trading wraps-up for November, oil and banking industries gain the center stage Wednesday which is anticipated to set the FTSE 1000 on a monthly decline of around 2 percent. Following five months of gains, this might become the index’s first monthly loss.

OPEC Outlook Lifts

International benchmark US West Texas Intermediate crude prices leaped 3.5 percent, while Brent crude surged 4 percent, after reports of OPEC Secretary General Mohammad Barkindo confirming that the international oil cartel is sure to reach a production-cut deal on Wednesday in their official meeting in Vienna.

Stakes of oil producers like BP PLC and Royal Dutch Shell PLC accelerated gains. Both stocks inched higher, with 2.2 percent and 3 percent, respectively.

The OPEC deal aims to address the current international oil supply glut that has been sending prices downward for the past two years. The first proposal was to cut the group’s oil output by above a million barrels a day, or around 1 percent of the world’s supply.

Stress Test Failure

royalbankscotland

With its failure in the tougher stress test for systemic UK banks, Royal Bank of Scotland made a 1.9 percent slump, off session lows. Now they must come up with an improved plan to generate capital, Bank of England stated Wednesday. RBS ought to come up with around £2 billion ($2.5 billion) in capital.

The stress test also disclosed capital insufficiencies at Standard Chartered PLC and Barclays PLC, but these banks are not required to submit new capital plans since they’ve already carried out their own actions to strengthen their capital, the BOE disclosed in a statement.

Standard Chartered stocks were down 0.4 percent and Barclays stakes had not much movement at £2.14 each.

“The key take away from the report is that the outlook for financial stability is challenging, Brexit and high levels of household debt have been cited as the key reasons for this,” said City Index research director Kathleen Brooks in a note.

“On the positive side, the BOE said that the U.K. is well able to finance its huge current account deficit, and the banking system, although not perfect, is in a position to support the U.K. economy, even in a severely stressed scenario,” she added.

Late Tuesday, the pound changed hands at $1.2479, down from $1.2503, in New York.

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