Lunchtime market roundup: Stocks higher but UK bank stocks suffer

Stock prices in London were generally higher on Friday midday, amid weakness for banks after a report that UK Chancellor John Healey was considering raising taxes on the banking sector in the upcoming budget, while industrial stocks shone.

The FTSE 100 index was up 10.22 points, 0.1%, at 10,850.57. The FTSE 250 was up 146.03 points, 0.6%, at 24,570.80, and the AIM All-Share was up 6.97 points, 0.9%, at 772.06.

The Cboe UK 100 was up 0.1% at 1,076.91, the Cboe UK 250 was up 0.9% at 21,623.37, and the Cboe Small Companies was up 0.5% at 18,904.43.

In European equities on Friday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt gained 0.9%.

Eurozone inflation accelerated in September, driven by a sharp rise in energy prices, while the bloc's trade deficit widened significantly in August as imports grew faster than exports, Eurostat figures showed on Friday.

The eurozone's annual inflation rate rose to 3.8% in September from 3.2% in August, confirming the flash estimate published earlier this month. A year earlier, inflation stood at 2.2%.

Meanwhile, Bank of England Governor Andrew Bailey said there was little evidence so far that higher inflation was becoming embedded in UK wage and price-setting.

Speaking at the Institute of International Finance's annual meeting in Bangkok on Friday, Bailey said the central bank was closely monitoring signs of second-round inflation effects, in which companies and workers seek to offset rising costs through higher prices and wages.

"To the extent we have seen evidence, it's quite subdued," Bailey said. "It's too early."

UK inflation currently stands at 3.1%, above the BoE's 2% target, and is forecast to reach 4% in the coming months.

The Monetary Policy Committee is due to announce its next interest rate decision on November 5, with markets expecting a quarter-point increase that would take the benchmark rate to 4%.

The pound was quoted at USD1.3343 at midday Friday, up from USD1.3254 at the London equities close on Thursday. Against the euro, sterling rose to EUR1.1844 from EUR1.1828.

The euro climbed to USD1.1267 from USD1.1204. Against the yen, the dollar fell to JPY157.87 from JPY158.16.

In the FTSE 100, WPP Group led the gainers, climbing 4.7%, followed by Babcock International Group, up 3.8%, Weir, up 2.6%, and Melrose Industries, up 2.1%.

Banks were among the worst performers, with Lloyds Banking Group falling 1.9% and NatWest Group declining 1.6%.

UK lenders came under pressure following a Guardian report that Chancellor John Healey was considering raising taxes on the banking sector in his October 28 budget to help offset pressure on public finances from the Middle East conflict.

According to the newspaper, one option is to reverse cuts to the bank surcharge introduced by former chancellor Jeremy Hunt, potentially raising more than £2 billion annually.

The surcharge currently stands at 3%, down from 8%, and is levied on top of the standard 25% corporation tax rate.

UK banks have warned that increasing the surcharge could constrain lending and weaken economic growth.

In a letter seen by Bloomberg, UK Finance Chief Executive David Postings told Healey that raising the surcharge from 3% to 8% could reduce lending by about £10 billion by 2029.

In the FTSE 250, THG rose 5.3%, extending Thursday's 16% rally.

Among smaller companies, 80 Mile jumped 16%, recovering some of the ground lost during Thursday's 16% decline.

Jarvis Securities fell 15%, extending its losses after dropping 13% on Thursday.

Iofina declined 12% after the iodine producer reported weaker-than-expected third-quarter production, despite making what it described as "significant" strategic progress.

Its Iofina Resources division produced 205.2 metric tonnes of crystalline iodine during the quarter, down from 215.8 tonnes a year earlier.

The company said production fell short of expectations because of lower-than-anticipated water volumes at its plants, maintenance work, and delays in completing one pipeline and commissioning another.

Stocks in New York were called mixed. The Dow Jones Industrial Average was called up 0.4%, the S&P 500 up 0.2% and the Nasdaq Composite down 0.1%.

The yield on the US 10-year Treasury was quoted at 5.10% at the London equities close on Thursday, while the yield on the US 30-year Treasury stood at 5.42%.

Brent oil traded at USD105.77 a barrel at midday Friday, down from USD106.33 late Thursday.

Meanwhile, EU leaders reaffirmed their support for Ukrainian President Volodymyr Zelensky on Friday amid renewed criticism from US President Donald Trump and disagreements over sanctions against Russia.

"You can count on us," European Council President Antonio Costa said alongside Zelensky and European Commission President Ursula von der Leyen in Brussels.

Trump has repeatedly criticised Zelensky and announced plans to import diesel from Russia to ease record-high fuel prices, while moving to relax sanctions against Moscow.

Costa rejected any easing of restrictions, arguing that pressure on Russia should instead increase.

"This is no time to relieve Russia's sanctions. Now it's time to increase our support, to increase our pressure [on Russia]," he said.

Trump had declared an immediate "energy ceasefire" between Russia and Ukraine on Sunday and accused Zelensky of contributing to higher global oil prices through attacks on Russian refineries.

Zelensky previously said Ukraine had reluctantly complied with Trump's demand for three days, despite continued Russian strikes on Ukrainian energy infrastructure.

"Of course, we supported President Trump's energy ceasefire, but we've seen that Russia did not respect it, not a single minute," von der Leyen said.

She added that Russia had intensified its attacks rather than observing the ceasefire, prompting the EU to begin work on a 22nd package of economic and financial sanctions against Moscow.

Gold was quoted at USD4,183.74 an ounce at midday Friday, rising from USD4,152.39 late Thursday.

Still to come on Friday's economic calendar are US export and import price figures, alongside industrial production data.

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