The FTSE 100 hit another record high on Friday driven by weaker-than-expected US inflation data, upbeat UK economic reports and strong NatWest results.
The FTSE 100 index closed up 67.05 points, or 0.7%, at 9,645.62, a new record close.
The FTSE 250 finished 167.61 points higher, or 0.8%, at 22,529.02 and the AIM All-Share rose 1.77 points, or 0.2%, to 777.06.
For the week, the FTSE 100 rose 3.1%, the FTSE 250 advanced 3.4% and the AIM All-Share rose 0.7%.
In Europe on Friday, the CAC 40 in Paris closed flat, while the DAX 40 in Frankfurt closed up 0.1%.
New York stocks rose sharply at the London close. The Dow Jones Industrial Average rose 1.2%, the S&P 500 rose 1.0% and the Nasdaq Composite advanced 1.3%.
The 10-year US Treasury yield was trading at 4.00%, unchanged from Thursday. The 30-year US Treasury yield stood at 4.58%, also unchanged from Thursday.
After a slow start, blue-chip stocks in London continued ahead after consumer price inflation in the United States accelerated at a slower-than-expected pace in September.
Lagged figures from the Bureau of Labor Statistics showed that the annual consumer price inflation rate was 3.0% in September, accelerating from 2.9% in August.
But the reading was below the consensus cited by FXStreet of 3.1%.
The core CPI, which excludes the more volatile costs of food and energy, rose 0.2% month-on-month and 3.0% year-on-year. It was expected to remain stable at August's level of 3.1%.
The figures were seen as giving the green light to the US Federal Reserve to lower rates at next week's Federal Open Market Committee (FOMC) meeting. A quarter point cut is expected.
Wells Fargo analysts said: “Today's weaker-than-expected CPI data should force the FOMC to cut rates by 25 (basis points) at its meeting next week. That said, today's data was not weak enough for the committee to agree on inflation.”
Economists believe that US inflation could remain “sticky” in 2026 due to the continued impact of tariffs and that this could have implications for future interest rate decisions.
Berenberg's Felix Schmidt believes high inflation will make it difficult for the Federal Reserve to lower the key interest rate again beyond its October meeting.
In the UK, there was a pleasant surprise with retail sales data, which rose 0.5% in September, defying forecasts for a 0.2% drop.
Danni Hewson, head of financial analysis at AJ Bell, said the figures should spark “cautious optimism” ahead of the sector's biggest shopping period, with Black Friday and Christmas just around the corner.
Adding to the positive tone, preliminary PMI data showed that business activity in the UK expanded at a faster pace in October, led by a rebound in the manufacturing sector. The S&P Global flash manufacturing composite index rose to 51.1 points, exceeding both the threshold of 50 unchanged and expectations of 50.6.
The September reading had fallen to 50.1 points. The latest data showed the slowest pace of job cuts since May and the weakest input price inflation since November 2024.
Additionally, figures show consumer confidence rose marginally in October as shoppers look forward to Black Friday, despite jitters around the upcoming budget.
The GfK long-term consumer confidence index rose two points, although it still languishes at -17.
The increase was largely driven by a four-point rise in the index's main purchasing marker, an indicator of confidence in buying big-ticket items, to -12, a nine-point improvement from last October.
The pound was trading lower at $1.3301 at the close of the London stock market on Friday, down from $1.3323 on Thursday.
The euro stood at $1.1631, down from $1.1609.
On the FTSE 100, NatWest and London Stock Exchange Group were locked in battle for top billing, with the two swapping places as the trading day progressed.
Lender NatWest ultimately won, rising 4.9% and hitting a 15-year high as the bank raised its annual forecasts and said profits in its third quarter rose by around a third.
The Edinburgh-based lender posted a third-quarter pre-tax profit of £2.18 billion, a 30% increase on £1.67 billion a year earlier. Total revenue improved 16% to £4.33 billion from £3.74 billion.
The London Stock Exchange Group took the silver medal, advancing 4.8%, following Thursday's well-received trading update.
Elsewhere, surprise retail sales and an improvement helped DIY retailer Kingfisher, which rose 1.9%.
RBC Capital Markets upgraded the B&Q owner to “outperform” from “sector perform” in the hope that growth opportunities for Kingfisher in the UK and Poland would provide upside to longer-term sales forecasts.
On the FTSE 250, WH Smith rose 4.2% as Peel Hunt was upgraded to “buy” from “hold”, after being downgraded by Barclays on Thursday.
The Swindon-based company is expected to reveal the results of an investigation into its US business next month following an understatement of its profits.
But Peel Hunt believes that even in a scenario where the United States is worth “literally nothing,” the “shares” of its other divisions are “still worth owning.”
Brent oil was trading at $66.56 a barrel, down from $65.75 late Thursday. Gold was trading at $4,125.47 an ounce on Friday, up from $4,146.49 on Thursday.
The biggest risers on the FTSE 100 were NatWest Group, up 26.8p to 572.4p, London Stock Exchange Group, up 450.0p to 9,799.0p, Tesco, up 9.8p to 455.4p, Next, up 280.0p at 13,435.0p and Polar Capital Technology Trust, up 8.5p to 572.4p. 450p.
The biggest fallers on the FTSE 100 were GSK down 26.5p to 1,620.0p, Airtel Africa down 2.4p to 228.0p, Hikma Pharmaceuticals down 17.0p to 1,753.0p, Diageo down 15.0p to 1,811.0 pennies and LondonMetric Property, down 1.6p to 1,620.0p. 196.9p.
Contributed by Alliance News
