Earnings and Rate Cut Bets Lift UK Stocks
UK stock indexes experienced a positive day on Tuesday, buoyed by a weaker sterling and encouraging earnings reports from several companies. The FTSE 100 index closed up 0.3%, remaining close to its all-time high of 8,548.59 points, which was reached on Monday.
Global stock markets also saw a slight uptick as investors reacted to new U.S. President Donald Trump’s executive orders on various issues, including energy and immigration, while awaiting his first moves on trade policy. The UK’s sterling dipped by 0.1% against the dollar following the release of data indicating a slight increase in the UK jobless rate to 4.4% for the three months ending in November, marking its highest level since May.
Despite the rise in unemployment, British pay growth remained robust during the same period. However, traders continued to anticipate an 86% probability of a 25 basis point rate cut from the Bank of England in the upcoming month, with expectations of approximately 65 basis points of easing by the end of 2025.
Among the notable performers in the FTSE 100, shares of Lloyds Banking Group surged by 4% after the Financial Times reported that Finance Minister Rachel Reeves had initiated a bid to protect car-loan providers from substantial payouts related to a landmark mis-selling case. Matt Britzman, a senior equity analyst at Hargreaves Lansdown, noted, “The UK government’s backing in the motor finance case is a clear positive for Lloyds, the bank most exposed to the issue.”
Barclays also saw a rise, climbing 1.4%, while the broader FTSE 350 banks index increased by 0.8%.
In the midcap sector, the FTSE 250 index gained 0.5%, driven by a 4.5% jump in shares of Abrdn. The asset manager reported net inflows of £1.2 billion ($1.5 billion) in client cash for the fourth quarter of 2024. Premier Foods also performed well, with its stock climbing 2.6% after the food producer projected its annual profit at the upper end of analysts’ expectations, buoyed by strong sales of its branded products during the holiday season.
Conversely, Marston’s saw a decline of 5.3% after the pub group reported higher overall sales for the 16 weeks ending January 18. However, adverse weather conditions in November and January hampered growth.
Overall, the UK stock market's positive performance on Tuesday was driven by a combination of strong corporate earnings, expectations of monetary easing, and government support for key sectors. As investors continue to navigate economic uncertainties, the outlook for UK stocks remains cautiously optimistic, particularly in light of supportive fiscal measures and resilient corporate performance.
