The UK’s FTSE 100 managed a slight increase on Friday, bouncing back from a recent near-three-month low as a positive shift in some sectors helped counteract inflation concerns sparked by Britain’s latest budget announcement. By 9:54 GMT, the FTSE 100 had risen by 0.6%, led by gains in consumer goods company Reckitt Benckiser. Reckitt’s shares surged by 9% after the company, alongside U.S.-based Abbott Laboratories, was absolved of liability in a preterm formula lawsuit. Oil stocks also made gains, with both Shell and BP rising over 1% each, as the price of crude oil jumped by approximately 3%. This increase came amid reports suggesting that Iran was preparing to launch a retaliatory strike on Israel from Iraq in the coming days, adding a geopolitical dimension to the day’s trading activity.
Meanwhile, the FTSE 250 index, which represents midcap stocks, saw a smaller gain of 0.2% but remained close to a recent three-month low. Britain’s new finance minister, Rachel Reeves, came under scrutiny following her budget presentation, criticised for emphasising spending, tax increases, and borrowing without sufficiently addressing economic growth. Both indexes have faced weekly losses, largely driven by concerns that increased government spending under Labour could heighten inflation, impacting investor sentiment around potential rate cuts in the coming year. Despite this, market forecasts suggest that the Bank of England may still implement a 25-basis-point rate cut next week.
Further weighing on market sentiment, an S&P Global survey revealed a slight contraction in British factory activity for the first time since April, largely due to fewer new orders, which may be a sign of slowing demand. Investors are now turning their attention to U.S. payroll data due later in the day, looking for clues on potential rate cuts from the Federal Reserve, which also has a policy meeting scheduled for next week.
In corporate news, Tesco shares rose by 1.5% following the announcement that the UK’s largest supermarket chain intends to return £700 million to shareholders through an additional share buyback. Online fashion retailer Boohoo also saw a 3% increase after appointing Dan Finley as its new CEO. This appointment was a blow to top investor Frasers Group, which had previously sought to name its controlling shareholder, Mike Ashley, to the position.
While inflation worries persist due to recent budget decisions, sector-specific gains provided the FTSE indices with some much-needed stability as investors look ahead to central bank decisions.
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