UK Stocks Slump Amid Tax Axing and Gilt Yield Surge

UK stocks witnessed a decline as gilt yields surged following a government decision to scrap planned income tax increases. The FTSE 100 and FTSE 250 both saw declines despite weekly gains. Investor sentiment was affected by global economic uncertainty and shifts in fiscal expectations.

On Friday, UK stocks faced a downturn as gilt yields soared after reports surfaced that the British government had abandoned plans to raise income tax in the forthcoming budget. This decision led the blue-chip FTSE 100 to fall by 1.1%, its steepest daily drop since April 9.

Despite this setback, the FTSE 100 and FTSE 250 ended the week with modest gains. Investors were taken aback by the finance minister's shift in fiscal policy, as it diverged from anticipation of tax hikes aimed at approaching a looming fiscal deficit.

The day saw a broad-based sell-off, with significant losses in the banking and mining sectors, while the hospitality industry provided a rare glimmer of optimism. Investors were further unsettled by nebulous prospects from the U.S. Federal Reserve and concerns surrounding economic data and an AI market bubble.

(With inputs from agencies.)