London stocks moved higher at midday on Friday, with the FTSE 100 edging above 10,850 points as gains among industrial companies offset weakness in banking shares, while investors assessed fresh eurozone inflation figures and comments from Bank of England Governor Andrew Bailey.
The FTSE 100 gained 10.22 points, or 0.1%, to 10,850.57, while the FTSE 250 outperformed, rising 0.6% to 24,570.80. The AIM All-Share advanced 0.9% to 772.06.
European markets also strengthened, with France’s CAC 40 climbing 0.3% and Germany’s DAX gaining 0.9%.
Fresh economic data showed eurozone annual inflation accelerated to 3.8% in September from 3.2% in August, driven largely by higher energy prices. The reading confirmed the preliminary estimate and compared with inflation of 2.2% a year earlier.
Meanwhile, Bank of England Governor Andrew Bailey suggested that higher inflation had yet to generate significant secondary pressures on UK wages and prices.
Speaking at an international financial conference in Bangkok, Bailey said evidence of businesses and workers responding to higher costs through sustained price and wage increases remained relatively subdued.
UK inflation currently stands at 3.1% and is expected to reach 4% in the coming months, keeping pressure on policymakers ahead of the Bank of England’s next interest rate decision on 5 November.
Markets are anticipating a quarter-point increase, which would take the Bank Rate from 3.75% to 4%.
In London, WPP led the FTSE 100 gainers with a 4.7% rise, followed by Babcock International, up 3.8%, Weir Group, up 2.6%, and Melrose Industries, which advanced 2.1%.
However, banking stocks came under pressure amid reports that Chancellor John Healey is considering increasing taxes on lenders in the forthcoming 28 October Budget.
Lloyds Banking Group fell 1.9% and NatWest declined 1.6%, as investors weighed the potential impact of higher taxation on banking profitability and lending.
One proposal reportedly under consideration involves reversing previous reductions to the bank corporation tax surcharge, potentially raising more than £2 billion annually.
The surcharge currently stands at 3%, having previously been 8%, and is applied in addition to the standard 25% corporation tax rate.
Banking industry representatives have warned that restoring the higher surcharge could reduce lending capacity. UK Finance has estimated that increasing the rate to 8% could reduce lending by approximately £10 billion by 2029.
Among mid-cap companies, THG gained a further 5.3%, extending Thursday’s 16% rally following an upgrade to its earnings expectations.
Smaller companies experienced mixed fortunes, with 80 Mile jumping 16%, recovering from a similar decline in the previous session.
Jarvis Securities fell 15%, extending Thursday’s 13% decline, while Iofina dropped 12% after reporting weaker-than-expected iodine production.
The iodine specialist produced 205.2 metric tonnes during the third quarter, down from 215.8 tonnes a year earlier, citing lower water volumes, maintenance and operational delays.
In currency markets, sterling strengthened to $1.3343 against the dollar, compared with $1.3254 at Thursday’s London close, while also rising to €1.1844 against the euro.
Gold increased to $4,183.74 an ounce, compared with $4,152.39 on Thursday, while Brent crude eased to $105.77 a barrel.
US stock futures pointed towards a mixed opening on Wall Street, with the Dow Jones Industrial Average expected to gain 0.4%, the S&P 500 up 0.2% and the Nasdaq Composite marginally lower.
Geopolitical tensions also remained in focus as European Union leaders reaffirmed support for Ukraine amid disagreements with Washington over sanctions against Russia and attacks on energy infrastructure.
The FTSE 100’s modest advance reflects continued support for industrial and selected defensive stocks, although concerns over potential bank taxation and the outlook for interest rates are limiting broader gains.
Investors will now turn to US industrial production and trade price figures for further indications of economic strength and inflationary pressures ahead of the next Federal Reserve policy decision.
