London stocks closed sharply higher on Friday, buoyed by reports that fresh peace negotiations between the US and Iran could be back on the table.
The FTSE 100 index ended the session up 97.06 points, or 0.9%, closing at 10,736.23, capping a solid week for UK equities.
The FTSE 250 gained 174.16 points, or 0.7%, finishing at 23,801.49, while the AIM all-share rose 4.22 points, or 0.6%, to close at 772.98.
For the week as a whole, the FTSE 100 rose 1.3%, the FTSE 250 climbed 0.8%, and the AIM all-share advanced 1.6%.
Reuters, citing three Pakistani sources, reported late on Friday that Pakistan is considering a path toward establishing new peace negotiations between the US and Iran, following a push initiated by China.
The report accelerated a fall in oil prices, with Brent crude for September delivery dropping to 95.49 dollars a barrel on Friday afternoon from 100.98 late on Thursday, taking it back below the 100-dollar mark.
Ahead of the geopolitical news breaking, investors in London were already in an upbeat mood following a series of better-than-expected domestic economic data releases throughout the day.
The S&P Global flash composite purchasing managers’ index rose to 52.1 points in July from 49.3 in June, a three-month high, beating the FXStreet-cited market consensus of 49.7 points, signalling a return to growth for the UK private sector.
The services PMI also returned to growth territory, hitting a three-month high by rising to 51.8 points in July from June’s final reading of 48.8.
UK retail sales volumes surged 4.2% year-on-year in June, accelerating from 3.5% in May and comfortably beating the FXStreet-cited consensus estimate of 2.3% annual growth.
The GfK UK consumer confidence index rose to minus 17 points in July from minus 23 points in June, again coming in ahead of market expectations.
Neil Bellamy, consumer insights director at GfK, said: “Hot on the heels of the summer heatwaves, July has delivered a wave of optimism…The lion’s share of the improvement is in the economy, with a 10-point advance in how consumers view the past year and an eight-point gain for the next 12 months.”
Allan Monks at JPMorgan cautioned that the pick-up in consumer confidence was likely influenced by temporary factors, including hot weather, the World Cup and political changes, and that these effects are likely to fade.
Nevertheless, Mr Monks said the overall message of the data releases is one of “growth resilience,” and predicted a 6-3 vote at the Bank of England’s upcoming rate decision, with the bank rate expected to remain at 3.75%.
Barclays expects Bank of England guidance next week to be “limited, cautious and non-committal,” while Mr Monks warned that the “balance of risks continues to shift in a hawkish direction.”
Tariffs returned to focus as the US announced fresh levies on 60 countries, ranging between 10% and 12.5%, with both the EU and UK subject to a 10% rate.
AJ Bell investment director Russ Mould said the new tariffs will not come as a “complete shock to markets, it is nonetheless another unwelcome source of uncertainty.”
European markets also closed firmly higher, with the CAC 40 in Paris up 0.9% and Frankfurt’s DAX 40 finishing 1.4% higher.
Among the biggest risers on the FTSE 100 were Relx, up 117.0p, Rolls Royce, up 56.6p, and Sage Group, up 36.6p, while BP and Shell were among the notable fallers.
Looking ahead, the economic calendar for the coming week includes interest rate decisions in the US, UK and Japan, alongside inflation figures in Australia and the eurozone.