British mid-cap stocks surged to their highest levels in over two years on Friday, buoyed by positive company earnings and a rebound in U.S. markets following favorable inflation data.
The FTSE 250 index, which tracks domestically focused UK stocks, rose 2.3%, reaching its peak since March 2022.
Meanwhile, the blue-chip FTSE 100 increased by 1.2%, closing at a two-month high.
The global market sentiment improved significantly as tech stocks rallied on Wall Street.
This came after a U.S. inflation report met expectations, reinforcing hopes for a potential interest rate cut by the Federal Reserve in September.
On the domestic front, speculation about the Bank of England’s next move is high.
The decision on a possible interest rate cut next week is uncertain, especially after unexpectedly high data on British services prices.
Traders are currently pricing in a 50% chance of a quarter-point rate cut on August 1.
In specific stock movements, NatWest saw a remarkable rise, with shares jumping 7% to reach a near-decade high.
This surge came as the bank raised its outlook and acquired a £2.4 billion ($3.1 billion) mortgage portfolio from Metro Bank.
“The company is feeling confident to go on the offensive,” remarked Danni Hewson, head of financial analysis at AJ Bell.
The FTSE 250 also saw significant gains, with Drax Group’s shares soaring nearly 14%.
The power generator reported higher first-half profits and projected its annual profit to be at the upper end of market expectations.
Babcock International experienced an 8.6% rise, as the defense engineering company upheld its full-year forecast.
Additionally, Jupiter Fund Management’s shares climbed 6.8%, following a report of profits that exceeded forecasts.
Overall, the market’s positive response reflects optimism fueled by strong earnings reports and favorable economic data, indicating a potentially stable outlook for the near future.