London Stocks Outperform Europe
The FTSE 100 finished higher on Thursday, outperforming other major European markets as gains in engineering stocks helped offset weakness among miners. The blue-chip index rose 56.32 points, or 0.5%, to close at 10,572.24.
Mid-Caps Also Advance
The FTSE 250 gained 253.44 points, or 1.1%, to end at 23,715.83. The AIM All-Share added 0.44 of a point, or 0.1%, finishing at 766.18.
Sterling Gives Up Earlier Gains
The pound faded into the close after earlier reaching its highest level in a year against the dollar. The move came as investors reacted to growing expectations that Home Secretary Shabana Mahmood could become chancellor in the incoming government led by Andy Burnham.
Mahmood Seen as Treasury Frontrunner
Mahmood has emerged as the leading candidate to replace Rachel Reeves at the Treasury when Burnham is expected to enter Downing Street on Monday. Energy Secretary Ed Miliband had previously been viewed as the main contender, but markets are seen as less comfortable with him because of concerns over fiscal discipline.
IMF Warns Against Higher Spending
The International Monetary Fund has urged Burnham’s incoming government to avoid raising public spending, even as households face pressure from higher energy bills. The warning added another layer of scrutiny to expectations around the next government’s economic policy.
Pound Ends Little Changed
Sterling traded at 1.3483 dollars on Thursday afternoon, almost unchanged from 1.3486 dollars on Wednesday, after earlier rising as high as 1.3558 dollars. Against the euro, the pound eased to 1.1784 euros from 1.1791 euros.
Markets Welcome Possible Chancellor Pick
Kathleen Brooks, research director at XTB, said the pound’s positive reaction suggested markets trust Mahmood to take a sensible approach to economic policy and address difficult questions around welfare spending. She also said the move indicates Burnham may be willing to give key economic roles to figures from the right of the Labour party.
UK Economy Returns to Growth
Investors also assessed data showing that the UK economy returned to modest growth in May. The Office for National Statistics said gross domestic product rose 0.1% after shrinking 0.1% in April, matching market expectations.
Services Offset Production and Construction Weakness
The services sector expanded 0.3% in May, helping offset a 0.5% decline in production and a 0.8% fall in construction. Over the three months to May, GDP grew 0.7%, slightly below the upwardly revised 0.8% expansion recorded in the three months to April.
Energy Shock Could Weigh on Growth
Sanjay Raja, chief UK economist at Deutsche Bank, said momentum may weaken as the year progresses. He warned that the energy squeeze linked to the Iran conflict could eventually hurt households and businesses, limiting spending and investment.
European Markets Slip
Elsewhere in Europe, the CAC 40 in Paris closed down 0.1%, while the DAX 40 in Frankfurt fell 0.3%. The weaker performance contrasted with London’s gains.
Wall Street Trades Mixed
In New York, the Dow Jones Industrial Average rose 0.3%, while the S&P 500 slipped 0.1% and the Nasdaq Composite declined 0.7%. The mixed session reflected renewed caution toward technology shares.
TSMC Falls Despite Strong Results
Taiwanese chipmaker TSMC fell 2.7% in early New York trading despite issuing positive forward guidance and reporting that second-quarter net profit jumped more than 77% to a record high, supported by strong demand for AI hardware.
Tech Earnings Face Higher Expectations
David Morrison, market analyst at Trade Nation, said the market reaction raises questions about what U.S. technology companies must deliver to excite investors again. He noted that this matters as earnings season accelerates over the next two weeks.
Netflix, Alphabet and Tesla in Focus
Netflix is due to report after the New York close on Thursday. Next week, Alphabet and Tesla are scheduled to release results, followed the week after by Amazon, Apple, Meta and Microsoft.
Treasury Yields Edge Higher
The U.S. 10-year Treasury yield traded at 4.57% on Thursday, compared with 4.56% on Wednesday. The 30-year Treasury yield widened to 5.10% from 5.08%.
Diploma Leads FTSE 100 Risers
Diploma was the strongest performer on the FTSE 100, rising 6.3% after raising its full-year guidance for the third time in five months. The company described its third quarter as very strong and now expects organic revenue growth of 14%, up from previous guidance of 12%.
Diploma Lifts Margin Forecast
The company also increased its operating margin forecast to around 26.5%, compared with 25% previously. The upgrade helped support broader enthusiasm for engineering and industrial names.
Takeover Activity Continues
Merger activity remained a major theme in UK equities. Rotork surged 67% after agreeing to a 4.14 billion pound cash takeover by Swiss engineering group ABB.
Gooch & Housego Accepts Bid
Gooch & Housego jumped 39% after the Somerset-based photonic components and systems maker accepted a 345.6 million pound offer from Maryland-based buyout fund Arlington Capital Partners VII.
Top FTSE 100 Gainers
The biggest FTSE 100 risers were Diploma, up 425.0p at 7,195.0p; Metlen Energy & Metals, up 2.2p at 43.6p; Spirax, up 280.0p at 6,930.0p; Kingfisher, up 11.8p at 297.1p; and Weir Group, up 96.0p at 2,504.0p.
Mining Stocks Lead Decliners
The largest FTSE 100 fallers were St James’s Place, down 94.0p at 1,110.0p; Antofagasta, down 154.0p at 3,588.0p; Endeavour Mining, down 92.0p at 3,422.0p; Fresnillo, down 60.0p at 2,455.0p; and Centrica, down 4.1p at 172.0p.
A Stronger London Session With Caution Elsewhere
Thursday’s session showed London benefiting from engineering strength, takeover momentum and confidence in possible fiscal leadership under Mahmood. Still, weak miners, geopolitical risks, rising energy costs and uncertainty around global technology earnings kept the wider market tone cautious.
