Global optimism lifts UK stocks ahead of budget

UK equities rose on Friday, mirroring gains across global markets as investors cheered signs of slowing inflation in the United States, while broadcaster ITV rallied following the sale of its stake in BritBox International to BBC Studios. The internationally focussed FTSE 100 index closed 0.7% higher after ending February flat on the month.

UK equities rose on Friday, mirroring gains across global markets as investors cheered signs of slowing inflation in the United States, while broadcaster ITV rallied following the sale of its stake in BritBox International to BBC Studios.

The internationally focussed FTSE 100 index closed 0.7% higher after ending February flat on the month. Markets including Japan's Nikkei, Europe's STOXX 600 and New York's S&P 500 hit all-time highs, supported by an AI-inspired rally in technology stocks as well as favourable U.S. inflation data.

"There's a buoyancy linked to the fact that the interest rate cycle may not be going back down fast, but it's certainly not going up again either," said Wes McCoy, UK equity fund manager at Abrdn. The FTSE 100, however, has lagged on the absence of major technology firms and concerns that the Bank of England may have to keep interest rates higher for longer.

BoE chief economist Huw Pill said he thought the time for the first rate cut by the central bank since the coronavirus pandemic remained "some way off". Easing U.S. and European bond yields took some pressure off British housebuilder and REIT stocks on Friday, with both indexes up more than 2%.

Also offering a boost was data showing British house prices rose in annual terms in February for the first time in more than a year, the latest sign of a recovery in the housing market after a dip in mortgage costs. Investors will shift their focus to UK Finance Minister Jeremy Hunt's pre-election budget due next week, where he is expected to cut taxes in the face of a 2.5-trillion-pound debt.

The more domestically oriented FTSE 250 rose 1.6%, its biggest daily percentage gain in more than two months. ITV jumped 14.3% after it sold its entire 50% stake in streaming service BritBox International to its joint venture partner BBC Studios for 255 million pounds ($322.09 million).

Pearson rose 5.6% after the education company met market expectations for 2023 operating profit.

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