The FTSE 100 closed lower on Friday amid domestic political uncertainty and following the postponement of planned US-Iran deal talks in Switzerland.
The FTSE 100 closed down 36.43 points, or 0.4%, at 10,363.27. The FTSE 250 closed down 129.99 points, or 0.6%, to 23,200.73, while the AIM All-Share fell 4.21 points, or 0.5%, to 795.83.
For the week, the FTSE 100 was down 1.0%, the FTSE 250 was down 0.5% and the AIM All-Share was up 1.0%.
UK bond yields rose on Friday after Andy Burnham won the Makerfield by-election, clearing the way for her expected bid to unseat Prime Minister Sir Keir Starmer.
Sir Keir congratulated Mr Burnham but again vowed to fight any leadership challenge during a public appearance in London on Friday.
“If there is a competition, then yes I will run, I will run. I have said it repeatedly, I am not going to give up on that,” he told reporters.
The 10-year bond yield rose to 4.84% at the close of London stock markets on Friday, compared with 4.76% at the same time on Thursday.
Kathleen Brooks, head of research at XTB, said: “Andy Burnham may have delivered a strong election result in Makerfield last night, but he has to work hard to persuade financial markets that he is the right man for the job of growing the UK economy and getting debt back under control.”
However, Brooks noted that the rise in yields was not solely due to Burnham's victory, as figures showed the government's borrowing costs exceeded forecasts in May.
According to the Office for National Statistics on Friday, public sector net borrowing, excluding public sector banks, amounted to £23.3 billion in May, up 30% from £17.9 billion a year earlier.
The figure exceeded the £17.7 billion forecast by the Office for Budget Responsibility by £5.6 billion.
Brooks said the current rise in UK bond yields tells us “three things: one, it's not all down to Andy Burnham, two, you can't borrow excessive amounts of money when growth is flat, and three, Burnham faces extremely limited circumstances if she takes down Starmer.”
If Burnham were to become prime minister, JPMorgan analyst Allan Monks sees a “high risk” of her considering a change to fiscal rules, despite appearing to rule it out in recent weeks.
“You would have to tread carefully given market pressure, but a motivated change to allow more growth-enhancing investment spending could work if communicated in the right way. This would receive some support from a number of economists and think tanks,” he said.
In better economic news, the ONS reported that UK retail sales volumes rose 1.2% in May from April, beating expectations.
The ONS said department stores benefited from good weather during the month, while promotions boosted sales at out-of-store retailers.
The pound was trading at $1.3227 on Friday afternoon, down from $1.3246 on Thursday. Against the euro, sterling fell to 1.1532 euros from 1.1541 euros on Thursday.
The euro traded lower against the dollar, at $1.1469 on Friday versus $1.1477 on Thursday. Against the yen, the dollar was trading at 161.26 yen, down from 160.99 yen on Thursday.
In European stock markets on Friday, the CAC 40 in Paris closed down 0.6%, while the DAX 40 in Frankfurt fell 0.2%.
US financial markets are closed on Friday for the June 16 holiday.
Oil prices rose after talks in Switzerland between the United States and Iran were postponed and fighting broke out between Israel and Hezbollah in Lebanon.
But the Iranian Foreign Ministry downplayed the delay, saying there was “no urgency” to meet with American negotiators in Switzerland since a memorandum of understanding to end the war in the Middle East had already been signed electronically.
Brent crude oil for August delivery was trading higher on Friday at $80.21 a barrel, up from $77.04 on Thursday.
Gold was trading at $4,152.32 an ounce on Friday, down from $4,230.61 on Thursday.
Rising oil prices supported BP and Shell, which rose 2.8% and 1.1%, respectively. The lower price of gold affected Fresnillo and Endeavor Mining, which fell 4.7% and 3.3%, respectively.
Informa rose 1.3% when Citigroup upgraded it from “neutral” to “buy”, after the Government abandoned its recommendation on Thursday against traveling to the United Arab Emirates and Saudi Arabia.
But Admiral fell 3.2% after RBC Capital Markets downgraded the Cardiff-based home and auto insurer to “sector perform” from “outperform.”
RBC said it is taking a more cautious stance on Admiral ahead of its interim results on August 6.
“We are taking a more conservative view of current volumes and margins, particularly in the first half, which has a small impact on forecasts for the rest of the year,” said analyst Ben Cohen.
On the FTSE 250, PPHE Hotel Group plunged 16% after suitor Fattal Hotels confirmed it is not planning to make a bid to list in London, after a key shareholder opposed its proposal.
Euro Plaza Holdings, which owns 33% of PPHE, “opposes Fattal's proposal,” the company said.
However, PPHE, the operator of the Park Plaza and art'otel hotels, said it “received an indicative proposal from another interested party.”
“This interest is at a very preliminary stage and is currently being evaluated,” he added.
The biggest risers on the FTSE 100 were BP, up 13.7p to 503.8p. 2,542.0p.
The biggest fallers on the FTSE 100 were Fresnillo, down 145.0p to 2,972.00p. 76.0p to 2430.0p.
Next week's global economic calendar includes PMI reports around the world and inflation data in Australia and Canada.
Next week's local corporate calendar includes full-year results from homebuilder Berkeley Group and defense manufacturer Babcock International.
Contributed by Alliance News.
