The U.K.'s FTSE 100 index reached a record intraday high above 8,484 points on Friday, strengthening by 1.1%. This surge occurred despite recent economic challenges, including multi-year highs in borrowing costs. Meanwhile, European markets displayed positive momentum, positioning regional stocks for a weekly gain. The increase in the FTSE 100, which is heavily influenced by international companies reliant on foreign earnings, contrasted with the modest 0.25% rise of the more domestically focused FTSE 250 index.
In recent weeks, U.K. borrowing costs have climbed as investors assessed the country's economic outlook. However, on Friday, British government borrowing costs fell following disappointing economic data, sparking hopes for potential interest rate cuts by the Bank of England in February. The yields on gilts, U.K. government bonds, fell across the board, with the yield on the 10-year gilt decreasing by four basis points at 9:02 a.m. London time.
Despite the challenging economic landscape, the pan-European Stoxx 600 index rose by 0.6% at 10:45 a.m. London time, with most sectors and all major bourses in positive territory. London's FTSE 100 was expected to open 130 points higher at 8,431, while Germany's DAX index and France's CAC 40 were predicted to open slightly higher, according to IG.
Retail sales in the U.K. fell by 0.3% in December compared to the previous month, contrary to economists' expectations of a 0.4% increase. This disappointing data contributed to the pressure on British government borrowing costs and added to the hopes of interest rate cuts.
On a brighter note, shares of Swiss travel retailer Avolta soared to the top of the Stoxx 600 on Friday, with a notable gain of 7.7% by 9:55 a.m. London time. In a statement, CEO Xavier Rossinyol attributed this growth to the company's "strong balance sheet, financial performance and confidence in its future cash generation."
"Strong balance sheet, financial performance and confidence in its future cash generation." — Xavier Rossinyol
Europe's mining stocks led early morning gains with a rise of 1.2% as investors kept an eye on reports of potential merger talks between Rio Tinto and Glencore. This sector's strength contributed significantly to the overall positive market sentiment across Europe.