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FTSE edges higher on banks, energy; Bernanke eyed

By 1143 GMT the FTSE 100 was 14.09 points higher at 5,329.18 after it closed 0.7 percent lower the previous session.

Investors in the UK were looking ahead to results due on Thursday from Royal Bank of Scotland and on Friday from Lloyds Banking Group for more evidence of the health of the financial system.

Banks were generally firmer. HSBC, Standard Chartered, Royal Bank of Scotland and Lloyds gained 0.4 to 1.6 percent.

Barclays was flat as it traded ex-dividend.

Investors in Britain’s blue-chip index were reluctant to take big positions ahead of a congressional testimony by Federal Reserve Chairman Ben Bernanke to be delivered to the House of Representatives and the Senate on Wednesday and Thursday, respectively.

After the surprise increase last week in the discount rate the Fed charges banks for emergency loans, the market will focus on how Bernanke explains the move.

‘They raised the discount rate so perhaps interest will rise sooner than the markets were thinking,’ said Philip Gillett, sales trader at IG Index.

The index is off 0.6 percent this week after adding 4.2 percent last week, as investor uncertainty has curbed risk appetite.

‘Sentiment is changing after the recovery we saw following the crisis (in 2008) and people are not sure if the market will trade higher from here,’ Gillett said.

Trade was thin with just 26 percent of the average volume of the last 90 trading days transacted by midsession.

OIL SUPPORT

Energy stocks were also a support for the index even as crude prices slipped below $79 per barrel.

BP, Royal Dutch Shell, Tullow Oil and Cairn Energy gained 0.5-1 percent.

Miners were a drag on the index as some metal prices weakened slightly, with BHP Billiton, Rio Tinto and Randgold losing 0.3- 0.8 percent.

The sector was also unsettled by news that major commodity consumer China could implement fresh measures to clamp down on excessive bank lending to temper its growth spurt.

China’s banking regulator has told commercial lenders to restrict new loans to local governments’ financing arms to ward off potential risks of default, state media reported, the latest step by Beijing to rein in galloping credit expansion.

Wolseley was the biggest faller on the index, retreating 2.3 percent after sharp gains the previous session after the building materials supplier issued a surprise, upbeat trading statement.

No major domestic economic data is due for release on Wednesday, so January US new home sales numbers, due at 1500 GMT, will be the main macro focus, with a figure of 0.36 million expected, up from 0.342 million in December.

Overall ex-dividend factors knocked 4.23 points off the FTSE 100 index on Wednesday, with Land Securities, Randgold Resources , Reckitt Benckiser, and Rio Tinto all losing their dividend attractions in addition to Barclays.