The British stock market closed higher on Friday, buoyed by strong performances in the defense and mining sectors. The FTSE 100 surged 1.1%, marking its best single-day performance in over a month, despite a turbulent week driven by uncertainty surrounding U.S. tariffs.
FTSE 100 and Midcap Index Post Mixed Results
While the FTSE 100 gained, the midcap FTSE 250 index rose 1.6% but closed its fourth consecutive week in the red. Investors remained cautious due to fluctuating trade policies and weaker-than-expected earnings reports.
Defence Sector Sees Significant Gains
Aerospace and defense stocks climbed 3.8%, leading sectoral gains. The rally followed Britain’s announcement of a £2 billion lending boost to foreign nations for purchasing British military equipment, including missiles and aircraft. Additionally, political developments in Germany, where Chancellor-in-waiting Friedrich Merz secured support for increased state borrowing, contributed to optimism in the defense sector.
Melrose Industries led the FTSE 100 gainers, rising 6.4%, while Babcock International Group saw a 4.3% increase, strengthening the midcap index.
Mining Stocks Surge Amid Gold Rally
Precious and industrial metal miners also posted gains, rising 1.8% and 2.3%, respectively. This surge followed a historic safe-haven rally, which pushed spot gold prices above the $3,000 mark for the first time.
Economic Concerns and Inflation Expectations Weigh on Markets
Despite Friday’s market rally, Britain’s economic outlook remains uncertain. The country’s GDP unexpectedly contracted by 0.1% in January, contradicting economists’ expectations of a 0.1% expansion.
Further concerns arose as a Bank of England survey revealed that long-term inflation expectations reached a five-year high in February. Analysts warned that escalating U.S. tariffs could further impact the UK economy, especially if reciprocal trade measures come into effect.
Upcoming Federal Reserve Decision in Focus
Investors are now turning their attention to the upcoming U.S. Federal Reserve policy decision, which could influence global markets. Any shifts in interest rates or monetary policy will likely have a direct impact on investor sentiment and market performance in the coming weeks.
As geopolitical tensions and economic uncertainties persist, traders remain cautious, balancing optimism with concerns over inflation and trade policies.