FTSE 100 joins European stock rally, Legal & General shines

The UK's blue-chip index rose on Friday, as gains in insurer Legal & General and broad optimism in European markets following remarks from European Central Bank policymakers outweighed declines in energy stocks. The internationally focussed FTSE 100 closed the session 0.5% higher, while marking a weekly gain of nearly 1%.

The UK's blue-chip index rose on Friday, as gains in insurer Legal & General and broad optimism in European markets following remarks from European Central Bank policymakers outweighed declines in energy stocks.

The internationally focussed FTSE 100 closed the session 0.5% higher, while marking a weekly gain of nearly 1%. The pan-European STOXX 600 also ended the week on a bright note, up 1.2%, after comments from three top ECB policymakers suggested the central bank might slow down its pace of interest rate hikes.

The gains followed a lacklustre session in UK markets on Thursday after Finance Minister Jeremy Hunt announced tax rises and spending cuts in a bid to restore stability to the economy, dashed by former prime minister Liz Truss's plans for unfunded tax cuts. The measures had been broadly flagged in recent days and so investors reacted with relative calm.

"The equity market was unsurprised by the budget because the UK market, for the most part, is pretty unrelated to the economy," said David Goebel, associate director of investment strategy at Evelyn Partners. Data on Friday showed British retail sales staged only a partial rebound last month after shops closed in September for the funeral of Queen Elizabeth, and they remained below their pre-pandemic level as soaring inflation hits spending power.

"Given the UK's difficult economic outlook compared to Europe and the United States, we're a bit more cautious and prefer to be focussed on the more internationally exposed companies," said Goebel. Among the top boosts to FTSE 100 was insurer Legal & General Group, up 3.1%, as it welcomed the Solvency II ratio package announced in the new budget and said risk margin reform will boost its solvency ratio by 3% to 4%.

Oil stocks such as Shell and BP came under pressure as crude prices tumbled on concern about weakening demand in China and further increases to U.S. interest rates. The more domestically focused FTSE 250 midcaps closed the session 0.8% higher, but marked its first weekly decline in five.

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