London stocks drop as rate-cut optimism fades; US data in focus

Precious metal miners led the losses among sectors, falling 8.9% to a nearly three-month low in a broad selloff, tracking the drop in gold prices. At current levels, the index is set to log its worst day in 22 months.

The UK's FTSE 100 fell on Friday, set to mark losses in the first trading week of 2024, owing to the aggressive repricing of early rate-cut bets, while investors looked ahead to U.S. jobs data for clues on the future path of interest rates globally.

The blue-chip FTSE 100 was down 0.7% on the day and nearly 1% for the week, on track to snap a five-week winning streak. The mid-cap FTSE 250 index eased 0.8%. Precious metal miners led the losses among sectors, falling 8.9% to a nearly three-month low in a broad selloff, tracking the drop in gold prices.

At current levels, the index is set to log its worst day in 22 months. Investors are now focussed on the U.S. non-farm payrolls data, due at 1330 GMT, for more clues on when the Federal Reserve will start trimming rates.

"Since the start of the year, we've seen some re-evaluation not so much on the direction of travel but more around the extent and timing of those rate cuts. Some of that reflects in the recent FOMC minutes," said Richard Flax, chief investment officer at Moneyfarm. "With that in mind, today's non-farm payrolls will get a lot of attention as investors assess whether we're really beginning to see a weakening in the labour market."

Money markets are now pricing in 130 basis points of interest rate cuts by the Bank of England in 2024, compared with 150 basis points last week. Among individual stocks, Endeavour Mining slid 14.3% to a fourteen-month low after the miner removed CEO Sebastien de Montessus with immediate effect, citing "serious misconduct".

Meanwhile, British house prices rose in annual terms in December for the first time in eight months, mortgage lender Halifax said, adding to signs of stabilisation in the property market after a hit from higher borrowing costs. Separately, a survey indicated Britain's construction sector showed signs in December that it might have seen the worst of a slump caused by the steep climb in interest rates.