London Market Faces Turbulence Amid Gilt Yield Spike and Budget Shifts

London stocks experience a sharp decline as gilt yields surge amid reports of the UK government abandoning income tax hikes in the upcoming budget. Investor confidence falters, leading to significant drops in the FTSE 100 and FTSE 250 indices. Banking stocks and precious metal miners lead the decline.

London's stock market faced significant losses on Friday as it headed towards weekly declines. A surge in gilt yields was prompted by reports that the UK government abandoned plans for income tax hikes in the forthcoming budget.

The FTSE 100 index fell by 1.9%, marking its steepest one-day drop since April. Similarly, the FTSE 250 declined by 1.7%, noting its worst performance since late September. Investor confidence dwindled following the decision by British Finance Minister Rachel Reeves to scrap income tax increases, casting doubt on the government's fiscal targets.

Heavy losses were seen across various sectors, including banking and precious metals. Negative global sentiment and hawkish comments from the U.S. Federal Reserve exacerbated declines. However, PPHE Hotel Group saw a surge of 13.5% amid potential stake sale news, while the energy sector mitigated losses as oil prices rose following a Ukrainian port attack.

(With inputs from agencies.)