Surging bond yields push UK midcaps to biggest weekly drop in over a year

(Reuters) -British midcap stocks logged their biggest weekly decline in more than a year on Friday, as surging borrowing costs on the back of higher inflation expectations and concerns about Donald Trump’s return to the White House hammered risk sentiment.

The , which is made up of companies that closely track the domestic economy, fell 1.4% to an eight-month low.

The index recorded a 2.8% weekly drop, its weakest performance since October 2023, hurt by a sharp rise in British borrowing costs that fuelled concerns about public finances following big spending plans announced by the government.

Investors were pinning this week’s big moves in bond markets on markets bracing for inflationary policies once Trump returns to office in the U.S.

Further pushing yields higher on Friday, stronger-than-expected U.S. payrolls data prompted traders to scale back bets of rate cut from the Federal Reserve this year.

Yields on UK government bonds remained elevated, with the one on the 10-year gilt hovering near its highest level since 2008, while the 30-year stood at its highest level since 1998.

The exporter-heavy dipped 0.9% but notched its third straight weekly advance, supported by a sharp drop in sterling through the week.

Oil and gas stocks were a bright spot, up 0.5%, crude prices rallied more than 4% to reach their highest levels since October as traders focussed on potential supply disruptions from more sanctions on Russia. [O/R]

Insurers dropped 2.3%, with those having a large exposure to the Los Angeles wildfires such Beazley and Hiscox (LON:) leading losses.

Alliance Pharma (LON:) jumped 38% after it agreed to be acquired by asset management firm DBAY Advisors in an all-cash deal valuing the healthcare group at 349.7 million pounds ($430 million).