The FTSE 100 experienced a significant decline of 1.1% on Friday, marking its steepest drop since April and nearly erasing the week's gains. This downturn followed an increase in UK gilt yields and a depreciation of the pound, amid speculation that Chancellor Rachel Reeves might reconsider planned income-tax increases in the upcoming November 26 budget. These developments have sparked concerns regarding the UK's fiscal outlook, prompting money markets to adjust their expectations for Bank of England interest rate cuts to below 60 basis points by the close of 2025. The banking sector bore the brunt of these market changes, with NatWest shares falling by 3.5%, Barclays by 3.1%, and both Lloyds and Standard Chartered experiencing declines exceeding 2%. HSBC also saw a reduction of 1.5%. Other leading stocks were not immune to the downturn, as seen with Unilever, Rolls-Royce, and British American Tobacco, all of which dropped between 1.4% and 1.9%.
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