UK Mid-Caps Lead Gains in Subdued Post-Budget Session
London's equity markets demonstrated resilience on Thursday, with mid-cap stocks notably outperforming as trading activity slowed during the US Thanksgiving holiday. The FTSE 100 index paused for breath after Wednesday's Budget announcements, closing marginally higher by just 2.35 points at 9,693.93.
The real action unfolded in the FTSE 250, which surged by 205.95 points, representing a solid 0.9% gain to reach 22,091.47. The AIM All-Share index followed suit, climbing 0.8% to 748.99 points.
Chris Beauchamp, Chief Market Analyst at IG, observed that "UK assets continue to hold up well in the wake of the Budget", noting that despite the absence of US market participation, "the rebound from last week's lows remains intact."
Budget Analysis: Fiscal Headroom Wins Praise, Questions Remain
The Chancellor's Budget continued to dominate analyst discussions, with experts acknowledging the improved fiscal position while highlighting unanswered economic questions. Callum McLaren-Stewart of Citi noted that while the fiscal headroom against rules had "more than doubled", the Budget essentially represented a "tax-and-spend event which frontloaded expenditure increases while backloading revenue measures."
More optimistic commentary came from Joshua Mahony at Scope Markets, who suggested the Budget measures have created "greater confidence" that the Bank of England will deliver an interest rate cut next month. The prospect of lower household costs appears to be helping reduce inflation expectations, potentially paving the way for monetary easing.
Sector Performance: Banks Rally While Bookmakers Face Headwinds
Financial institutions emerged as clear winners from the Budget announcements, with banking stocks extending their gains for a third consecutive session. Lloyds Banking Group led the charge with a 3.0% advance, followed by NatWest at 2.3% and Barclays gaining 1.7%.
Wealth manager St James's Place climbed 2.0%, benefiting from both ISA reforms and expectations of lower interest rates. UBS analysis indicated the firm stands to gain from reduced equity costs in a lower rate environment.
The gambling sector experienced mixed fortunes following gaming duty changes outlined in the Budget. William Hill owner Evoke fell 4.1%, with CEO Per Widerstrom condemning the tax increases as "ill-thought-through, counter-productive, and highly damaging." Conversely, Paddy Power owner Flutter Entertainment managed a 2.2% gain.
Corporate Highlights and European Context
Among individual movers, water utility Pennon surged 4.5% after reporting a strong return to profitability, swinging from a £38.8 million loss to a £65.9 million pre-tax profit for the six months to September 30.
Packaging firm Macfarlane jumped 10% as operations at its Pitreavie business recovered following October's fatal incident, with the company maintaining its revised profit guidance.
European markets showed modest movements, with the DAX 40 gaining 0.2% while the CAC 40 remained flat. The European Central Bank's meeting minutes revealed officials remain divided on whether the rate-cutting cycle has concluded, with some advocating for maintaining "full optionality" for future decisions.
Currency and Commodity Movements
The pound maintained its strength against the dollar, trading at $1.3251 compared to $1.3232 on Wednesday, despite increased expectations for Bank of England rate cuts.
In commodity markets, Brent crude advanced to $63.28 per barrel, while gold retreated slightly to $4,153.66 per ounce. TD Economics analysts suggested gold's "meteoric rally" is taking a breather, but predicted further monetary easing and geopolitical risks could push the yellow metal to test record highs again in 2026.
Looking Ahead
Friday's economic calendar features GDP data from Canada and inflation figures from France and Germany, while UK corporate updates include half-year results from Foresight Environmental Infrastructure. Market participants will be watching for further developments as the full implications of the Budget continue to unfold across different sectors of the UK economy.
