UK Stocks End Month with Heavy Losses Amid Rate Cut Concerns

The UK's stock indexes fell as investor hopes for significant rate cuts diminished. Shell surged following profit forecasts, while FTSE 100 and FTSE 250 faced losses due to concerns about inflation and the Bank of England's rate decisions. Traders reevaluate rate cuts after tax hikes.

The UK's benchmark stock indexes declined on Thursday, signaling a month of significant losses as investor confidence in substantial rate cuts dwindled. Shell's shares, however, rose notably after surpassing profit forecasts. At 0830 GMT, the FTSE 100 fell 0.6%, its lowest level since early August, setting it on a path for a second consecutive week of losses. The FTSE 250 index also dropped by 0.5%.

Throughout the month, the FTSE 100 experienced a 1.5% decline, with the FTSE 250 receding by 2.5%. Britain's new extensive budget plans have exacerbated inflationary pressures, complicating the Bank of England's capacity to implement rate cuts that investors had anticipated, thus marking a divergence from other central banks.

Traders now forecast approximately 95 basis points of rate reductions by the end of 2025, reduced from an earlier estimate of 125 basis points, following Finance Minister Rachel Reeves's announcement of the largest tax increases in three decades in her inaugural budget statement on Wednesday. In early trading, only three of the 22 subindexes showed gains, with the oil and gas sector leading with a 0.5% increase.

Shell rose by over 1% after reporting third-quarter profits of $6 billion, surpassing expectations despite weaker oil refining and trading results, thanks to heightened LNG sales. The personal goods sector emerged as the top performer, advancing nearly 1% as Burberry surged 1.7% subsequent to an upgrade from HSBC to "buy."

However, Smith + Nephew faced a 12% decline, the steepest on the benchmark index, after the major UK medical products manufacturer slashed its annual underlying revenue growth projection due to underwhelming performance in China. Conversely, Coca-Cola HBC advanced 2.3% post-raising its annual forecast and surpassing market expectations for third-quarter organic revenue growth, driven by robust demand in the energy, coffee, and sparkling drinks sectors.

Whitbread dipped 2.1% as it traded excluding the entitlement to its recent dividend payout.

(With inputs from agencies.)