London’s key index ended its upwards run this week, heading downwards on Thursday, as market volatility resurfaced around US trade policy and the fiscal outlook, and increased UK borrowing signalled a potential for tax rises.
The FTSE 100 index closed down 47.20 points, 0.5%, at 8,739.26.
The FTSE 250 fell 150.01 points, 0.7%, at 20,799.66, and the AIM All-Share declined 0.46 of a point, 0.1%, at 736.74.
The Cboe UK 100 ended down 0.8% at 870.03, the Cboe UK 250 closed 0.4% lower at 18,274.15, and the Cboe Small Companies ended little changed at 16,550.95.
‘Market volatility has resurfaced amid renewed uncertainty surrounding [US] trade policy and the fiscal outlook. With bond yields elevated and tariff and budget risks in focus, this volatility may persist as investors monitor further developments in policy,’ said Mark Haefele, chief investment officer, UBS Global Wealth Management.
In New York on Thursday, stocks were mixed, after falling heavily on Wednesday. At the time of the London close, the Dow Jones Industrial Average was down 0.1%, the S&P 500 was flat and the Nasdaq Composite was up 0.5%.
The yield on the US 10-year Treasury was quoted at 4.57%, widening from 4.54% on Wednesday. The yield on the US 30-year Treasury was quoted at 5.08%, widening from 5.02%.
Stocks in New York fell sharply on Wednesday after an auction of 20-year Treasuries saw very weak demand ahead of President Trump’s massive tax bill going through Congress.
On Thursday, the US House of Representatives passed Trump‘s tax bill by a single vote after days of wrangling.
The ‘One Big, Beautiful Bill Act’ which now moves to the Senate would usher into law Trump’s vision for a new ‘Golden Age’, led by efforts to shrink social safety net programs to pay for a 10-year extension of his 2017 tax cuts.
‘This is arguably the most significant piece of Legislation that will ever be signed in the History of our Country!’ Trump wrote on his Truth Social platform.
The dollar gained some traction after recent weakness. The pound was quoted lower at $1.3425 late on Thursday in London, compared to $1.3443 at the equities close on Wednesday.
The euro dipped to $1.1285 against $1.1389. Against the yen, the dollar was trading higher at JP¥143.81 compared to JP¥143.63.
In European equities on Thursday, the CAC 40 in Paris ended down 0.6%, while the DAX 40 in Frankfurt fell 0.5%.
Back in the UK, figures showed UK government borrowing surged by more than expected last month, suggesting tax hikes could be in the offing.
According to the Office for National Statistics, UK government borrowing, excluding private sector banks, spiked to £20.16 billion in April, from £14.14 billion in March.
It rose from £19.14 billion a year prior, but had been expected to fall to £17.9 billion, according to consensus cited by FXStreet.
The latest figure was the fourth highest for the month of April since monthly records began being compiled in 1993.
Pantheon Macroeconomics analyst Elliott Jordan-Doak said the figures piles further pressure on the chancellor when other demands - such as greater defence spending - remain urgent.
‘This likely marks the start of what will be a fraught set of negotiations within government over the summer to determine the shape of the budget,’ he added.
‘We have maintained for some time that taxes would need to be raised to meet the government’s spending priorities, even before defence spending was set to increase. We remain comfortable with this call,’ the analyst added.
Other data showed the UK private sector economy remained in decline in May, amid manufacturing sector weakness.
The S&P Global flash composite purchasing managers’ index rose to 49.4 points in May, from April’s final tally of 48.5. Although a two-month high, the latest reading suggests the private sector remains in negative territory.
On the FTSE 100, Hiscox jumped 7.6% as it outlined plans for growth in the year ahead and announced a hike in its dividend payouts.
The Hamilton, Bermuda-based business insurer hosted a capital markets day on Thursday.
It aims to reach double-digit premium growth within its Retail division in 2028, by ‘continuing to take share in each of our sizeable serviceable addressable markets’.
The firm also intends to implement a range of initiatives that will enable Hiscox to deliver an annualised profit and loss benefit of $200 million in 2028 and onwards.
In addition, Hiscox has planned a 20% hike in its final dividend for 2025, with a progressive dividend per share from then on. This follows a 15% increase in its dividend in 2024.
Retailers JD Sports and Marks & Spencer rose 2.5% and 1.5% respectively on further consideration of Wednesday’s results.
M&S was further boosted by an upgrade to ’buy’ from Jefferies.
M&S continues to ‘demonstrate strong fundamental growth in a buoyant UK consumer environment while buy-side expectations for profit delivery in financial 2026 have moderated to more sustainable levels,’ the broker said in a research note.
Rate sensitive housebuilders fell back after Wednesday’s strong inflation print.
Persimmon was 3.2% lower, Taylor Wimpey fell 3.2% and Barratt Redrow declined 2.6%.
Johnson Matthey took the gold medal on the FTSE 250, leaping 29%.
The London-based speciality chemicals company plans to return £1.4 billion to shareholders after selling its Catalyst Technologies business to Honeywell International.
It agreed the sale of Catalyst Technologies to Charlotte, North Carolina-based Honeywell at an enterprise value of £1.80 billion on a cash and debt-free basis, representing a 13.3 times earnings before interest, tax, depreciation and amortisation multiple.
The company said the enterprise value represents a ‘significant premium’ to the average sell-side analyst valuation of £945 million.
The deal is expected to deliver net sale proceeds of £1.6 billion to Johnson Matthey.
Johnson Matthey Chief Executive Liam Condon said the deal represents a ‘significant milestone’ in firm’s history.
‘We will now fundamentally re-shape Johnson Matthey into a more focused and leaner business. This will better position us to leverage our strong capabilities and leading market positions in Clean Air and PGM Services to drive a step change in sustainable cash generation with higher returns to shareholders,’ he said.
The ‘significant’ £1.4 billion return to shareholders is expected following completion of the sale, which is likely by the first half of 2026.
Gold was lower at $3,289.44 an ounce against $3,312.03 on Wednesday.
Brent oil was quoted at $64.05 a barrel in London on Thursday, lower from $65.08 late Wednesday.
Friday’s global economic calendar sees UK retail sales and UK consumer confidence figures, and US new homes data.
The domestic corporate calendar on Friday has half-year results from trading platform AJ Bell.
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