London’s FTSE 100 underperformed against its European peers on Friday as it closed in the red, pushed down by a weak retail sales reading, and despite hopes for potential Israel-Iran peace progress.
The FTSE 100 index closed down 17.15 points, 0.2%, at 8,774.65. It had earlier traded as high as 8,847.28.
The FTSE 250 ended 74.51 points higher, 0.4%, at 21,148.50, and the AIM All-Share rose 0.95 of a point, 0.1%, at 759.14.
For the week, the FTSE 100 closed down 0.9%, the FTSE 250 ended down 0.1% and the AIM All-Share ended down 0.6%.
The Cboe UK 100 closed down 0.2% at 873.92, the Cboe UK 250 ended 0.5% higher at 18,707.53 and the Cboe Small Companies rose 1.4% at 17,245.59.
In European equities on Friday, the CAC 40 in Paris closed up 0.3%, and the DAX 40 in Frankfurt ended 1.3% higher.
On Wall Street, markets were mixed at the time of the London close on Friday.
The Dow Jones Industrial Average was up 0.3%, the S&P 500 was down 0.1% and the Nasdaq Composite was 0.4% lower.
The yield on the US 10-year Treasury was quoted at 4.40%, stretched from 4.39%. The yield on the US 30-year Treasury was quoted at 4.91%, widened from 4.89%.
Hopes grew on Friday that diplomatic progress could be made towards dialling down the tensions in the Middle East.
French President Emmanuel Macron said France and other European powers would make an offer to Iran of a comprehensive diplomatic solution to end the escalating conflict with Israel, AFP reported.
French Foreign Minister Jean-Noel Barrot will meet Iranian counterpart Abbas Araghchi in Geneva ‘to make a complete diplomatic and technical offer for negotiations,’ Macron told reporters, adding that France and allies Germany and the UK were ‘putting a diplomatic solution on the table’.
‘Iran must show that it is willing to join the platform for negotiations we are putting on the table,’ Macron said.
The developments came after US President Donald Trump said he will decide on potential US action against Iran within two weeks.
‘Based on the fact that there‘s a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks,’ Trump said in a dictated message, according to White House spokeswoman Karoline Leavitt.
Stephen Innes at SPI Asset Management said Trump’s two-week ‘thinking window’ on whether to join Israel’s war against Iran is ‘no cooling-off period - it’s a ticking volatility clock.’
Ipek Ozkardeskaya at Swissquote Bank agreed stating: ‘I’m not sure the US buying itself time can be interpreted as a sign of de-escalation.’
Brent oil traded lower at $76.49 a barrel late on Friday from $78.59 on Thursday.
The downward correction saw BP fall 2.0% and Shell drop 0.7%.
Also weighing on London’s blue-chip index, a drop in drugs firms GSK and AstraZeneca, which ended 2.2% and 1.3% lower. Earlier this week, Trump renewed his threats of tariffs on the sector.
Also the UK, investors weighed a sharp drop in retail sales and assessed public sector borrowing figures.
Data from the Office for National Statistics showed UK retail sales fell 2.7% in May from April.
This was against a 1.3% rise in April from March and worse than the 0.5% decrease expected by FXStreet-cited market consensus.
On an annual basis, retail sales decreased by 1.3% in May, compared with market consensus for a 1.7% increase.
Rob Wood at Pantheon Macroeconomics said while May’s month-to-month fall puts a halt to the rapid rise in retail sales volumes over the start of the year, that the underlying upward trend of consumer spending growth will resume in June.
He noted surveys show that households have rebuilt their ‘rainy day savings and are comfortable with their level of assets. We think this will provide a secure floor for consumer spending.’
But Callum McLaren-Stewart at Citi thinks the figures constitute ‘compelling evidence’ of a turn in consumer demand and increases the likelihood of an August interest rate cut.
Retail share prices were mostly lower. B&M fell 3.3%, JD Sports fell 0.6%, Next fell 0.2% and Marks & Spencer down 0.7%.
Separate figures from the ONS showed UK government borrowing last month jumped to the highest level for May outside the pandemic era despite a boost to the tax take after the chancellor’s national insurance hike.
Borrowing surged to £17.69 billion last month, the second highest figure on record for May, surpassed only at the height of Covid, from £16.12 billion a year prior. On-month net borrowing slimmed from £20.05 billion.
Borrowing for the first two months of the financial year to date was £37.7 billion, £1.6 billion more than the same two-month period in 2024.
Lloyds Bank analysts noted the figure was actually £3 billion below what the Office for Budget Responsibility expected at this point.
‘It isn’t all good news for the government though. On a cash basis (central government net cash requirement), the government has had a requirement of £39.9 billion over April and May and that is £7.4 billion more than the OBR benchmark at this stage,’ Lloyds added.
The pound was quoted up at $1.3467 at the time of the London equities close on Friday, compared to $1.3429 on Thursday. The euro stood higher at $1.1521 against $1.1468. Against the yen, the dollar was trading at JP¥145.89, up compared to JP¥145.65.
On the FTSE 100, Berkeley Group fell 8.2% as profit guidance fell short of hopes.
The housebuilder expects pretax profit of £450 million for its new financial year. Profit in the following year is ‘likely to be similar’.
The Cobham, England-based company posted pretax profit of £528.9 million for the financial year ended April 30, down 5.1% from £557.3 million the prior year. Revenue edged up to £2.49 billion from £2.46 billion.
‘In terms of guidance, the group is now pointing to PBT of £450 million in FY26, and a similar level in FY27. We suspect that tougher trading, and increased sales incentives are at the heart of this [guidance],’ analysts at Peel Hunt commented.
‘Currently, we forecast £475 million and £482 million, implying we need to cut our forecasts by 5-6%.’
United Utilities fell 1.7% as RBC Capital Markets downgraded to ’sector perform’ from ’outperform’ after Thursday’s capital markets day.
Mulberry fell 11% after announcing a £20 million fundraise and plans to cut costs by £5.9 million as part of a restructuring.
The Somerset, England-based luxury handbag maker said it needed further capital to fund its growth strategy in ‘light of an even more challenging trading environment’.
Gold was quoted lower at $3,366.36 an ounce against $3,368.94.
The biggest risers on the FTSE 100 were Melrose Industries, up 17.90 pence at 517.20p, Standard Chartered, up 26.00p at 1,178.50p, Schroders, up 5.40p at 364.40p, Rentokil, up 5.00p at 350.00p and Prudential, up 12.00p at 894.20p.
The biggest fallers on the FTSE 100 were Berkeley Group, down 340.00p at 3,810.00p, GSK, down 32.50p at 1,402.50p, BP, down 8.25p at 384.70p, Intertek, down 88.00p at 4,646.00p, and United Utilities, down 19.50p, at 1,124.00p.
Monday’s global economic calendar has flash composite PMI readings in the UK, eurozone and US plus US existing homes data.
There are no significant domestic corporate events scheduled on Monday. Later in the week, Bunzl releases a trading statement and Babcock International reports full-year results.
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