The UK mid-cap index fell to its lowest level in over eight months on Thursday, dragged down by weak Christmas trading updates from retail stocks and continued pressure from rising bond yields.
Tesco, the UK’s largest supermarket chain, declined 1.7% after reaffirming its full-year profit guidance.
Marks & Spencer posted a better-than-expected 8.9% growth in like-for-like food sales during the holiday season but cautioned about cost pressures and economic challenges in the year ahead, pushing its shares down by 5.2%.
The retail index slumped 2.9%, reaching its lowest point in nearly a year. Discount retailer B&M dropped 13.4% after trimming the upper range of its annual profit forecast. Meanwhile, Greggs Plc fell 10.4% following modest 2.5% growth in fourth-quarter like-for-like sales, as tighter budgets led to reduced purchases of seasonal treats like Festive Bakes and gingerbread lattes.
The domestically focused FTSE 250 index declined by 0.7% as of 0941 GMT, impacted by a sharp rise in UK borrowing costs. Concerns about elevated government borrowing and proposed tax increases on businesses by finance minister Rachel Reeves further weighed on sentiment.
“The retail sector faces significant challenges this year, with looming tax hikes adding to an already tough operating environment,” noted Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Yields on 10-year gilts have surged by 25 basis points this week, reaching their highest levels since 2008, while 30-year gilts climbed to levels not seen since 1998.
However, the exporter-heavy FTSE 100 gained 0.4%, hitting a three-week high, supported by a weaker pound.
Miners, including Antofagasta, Anglo American, and Rio Tinto, climbed between 2.4% and 4.8% as metal prices edged higher.
Concerns over U.S. President-elect Donald Trump’s tariff plans and stronger-than-anticipated U.S. economic data have stoked fears of rising inflation, leading traders to scale back expectations of significant rate cuts this year.
