Britain’s FTSE 100 posted its largest weekly gain in over six months on Friday, driven by a drop in sterling that supported dollar-earning companies, while banks faced pressure from weak business activity data.
The blue-chip FTSE 100 index closed 1.4% higher on the day, marking a 2.5% weekly rise—its best performance since May 7.
The pound fell 0.6% to $1.25105, its lowest level since May, following reports that British business output in November contracted for the first time in more than a year.
Additionally, retail sales for October declined far more than anticipated.
The weaker currency boosted UK-listed international firms like AstraZeneca, Unilever, and Reckitt Benckiser, which generate a significant portion of their revenue from overseas markets.
Meanwhile, British finance minister Rachel Reeves’ late October budget, which included tax hikes on businesses and the wealthy, contributed to the first contraction in private sector activity in over a year.
“So, all this points to uncertainty and sort of a fragile outlook for the UK as a whole,” said Daniel Coatsworth, an investment analyst at AJ Bell.
“But overall, it’s a strange situation where you have lots of negative economic data points that’s weakened the pound, but is really good for the large amount of overseas focus companies that are listed in London.”
Despite the broader market gains, banks such as Barclays, HSBC, and Lloyds Banking Group fell between 0.3% and 2.1%, affected by the weak economic data.
Traders expect the Bank of England to maintain interest rates next month, with additional rate cuts likely in 2024.
Expectations for cuts next year have risen to about 72 basis points from 67 basis points before the data release.
The FTSE 250 midcap index climbed 1.1% to its highest level in over a week.
Games Workshop soared 17.3% to an all-time high, becoming the biggest gainer on the midcap index, following an optimistic half-year forecast from the miniature wargame maker.