The FTSE 100 ended Friday lower amid domestic political uncertainty and after the postponement of planned US-Iran deal talks in Switzerland.
The FTSE 100 closed down 36.43 points, 0.4%, at 10,363.27. The FTSE 250 ended down 129.99 points, 0.6%, at 23,200.73, while the AIM All-Share fell 4.21 points, 0.5%, to 795.83.
For the week, the FTSE 100 was down 1.0%, the FTSE 250 declined 0.5%, and the AIM All-Share rose 1.0%.
UK gilt yields rose on Friday after Andy Burnham won the Makerfield by-election, clearing the way for his expected bid to oust Prime Minister Sir Keir Starmer.
Sir Keir congratulated Mr Burnham, but again pledged to fight any leadership challenge during a public appearance in London on Friday.
“If there is a contest then yes I will run, I will stand. I’ve said repeatedly, I’m not going to walk away from that,” he told reporters.
The yield on 10-year gilts ticked up to 4.84% at the time of the London equity markets close on Friday, compared to 4.76% at the same time on Thursday.
Kathleen Brooks, research director at XTB, said: “Andy Burnham may have won a resounding election result in Makerfield last night, but he has hard work to persuade financial markets that he is the right man for the job to grow the UK economy and get debt back under control.”
However, Ms Brooks noted the rise in yields was not all down to Mr Burnham’s win, as figures showed government borrowing costs topped forecasts in May.
According to the Office for National Statistics on Friday, public sector net borrowing, excluding public sector banks, totalled £23.3 billion in May, up 30% from £17.9 billion a year earlier.
The figure exceeded the £17.7 billion forecast by the Office for Budget Responsibility by £5.6 billion.
Ms Brooks said the rise in UK gilt yields today tells “us three things, one, it is not all because of Andy Burnham, two, you cannot borrow excessive amounts of money when growth is flat-lining, and three, Burnham faces extremely constrained circumstances if he does topple Starmer”.
Should Mr Burnham become PM, JPMorgan analyst Allan Monks sees a “high risk” that he would consider a change to the fiscal rules, despite appearing to rule this out in recent weeks.
“He would need to tread carefully given market pressure, but a change motivated to allow more growth-enhancing investment spending could work if communicated in the right way. This would receive some support from a range of economists and think tanks,” he said.
In better economic news, the ONS reported that UK retail sales volumes rose 1.2% in May from April, beating expectations.
The ONS said department stores benefited from good weather during the month, while promotions boosted sales at non-store retailers.
The pound traded at 1.3227 US dollars on Friday afternoon, down from 1.3246 dollars on Thursday. Against the euro, sterling ebbed to 1.1532 euros from 1.1541 euros on Thursday.
The euro traded lower against the greenback, at 1.1469 dollars on Friday against 1.1477 dollars on Thursday. Against the yen, the dollar was trading at 161.26 yen, up from 160.99 yen on Thursday.
In European equity markets on Friday, the CAC 40 in Paris ended down 0.6%, while the DAX 40 in Frankfurt fell 0.2%.
US financial markets are closed on Friday for the Juneteenth holiday.
Oil prices crept higher after talks in Switzerland between the US and Iran were postponed and fighting flared between Israel and Hezbollah in Lebanon.
But the Iranian foreign ministry played down the delay, saying that there was “no urgency” to meet US negotiators in Switzerland, as a memorandum of understanding to end the Middle East war had already been signed electronically.
Brent crude for August delivery traded higher at 80.21 dollars a barrel on Friday, up from 77.04 dollars on Thursday.
Gold traded at 4,152.32 dollars an ounce on Friday, down from 4,230.61 dollars on Thursday.
The stronger oil price supported BP and Shell, which were up 2.8% and 1.1%, respectively. The lower gold price hit Fresnillo and Endeavour Mining, which were down 4.7% and 3.3%, respectively.
Informa rose 1.3% as Citigroup upgraded it to “buy” from “neutral”, after the Government on Thursday dropped its advice against travelling to the United Arab Emirates and Saudi Arabia.
But Admiral fell 3.2% after RBC Capital Markets downgraded the Cardiff-based home and motor insurer to “sector perform” from “outperform”.
RBC said it is taking a more cautious view on Admiral ahead of its interim results on August 6.
“We are taking a more conservative view of current volumes and margins, particularly in H1, which has a small knock-on impact to out-year forecasts,” said analyst Ben Cohen.
On the FTSE 250, PPHE Hotel Group plunged 16% after suitor Fattal Hotels confirmed it does not plan to make an offer for the London listing, after its proposal was opposed by a key shareholder.
Euro Plaza Holdings, which owns 33% of PPHE, “is opposed to the Fattal proposal”, the firm said.
However, PPHE, the operator of Park Plaza and art’otel hotels, said it has “received an indicative proposal from another interested party”.
“This interest is at a very preliminary stage and is currently being assessed,” it added.
The biggest risers on the FTSE 100 were BP, up 13.7p at 503.8p, National Grid, up 21.5p at 1,212.0p, London Stock Exchange Group, up 122.0p at 8,460.0p, Informa, up 11.4p at 875.0p and Experian, up 33.0p at 2,542.0p.
The biggest fallers on the FTSE 100 were Fresnillo, down 145.0p at 2,972.00p, Endeavour Mining, down 138.0p at 4,042.0p, Admiral, down 108.0p at 3,254,0p, Antofagasta, down 133.0p at 4,036.0p, and Weir Group, down 76.0p at 2,430.0p.
Next week’s global economic calendar has PMI reports across the world and inflation data in Australia and Canada.
Next week’s local corporate calendar includes full-year results from housebuilder Berkeley Group and defence manufacturer Babcock International.
Contributed by Alliance News.
