FTSE 100 turns negative as oil prices rise and US rates climb

Key facts

• FTSE 100 index closed lower on Friday.
• Bank of England survey shows businesses expect slower price increases.
• Brent crude oil prices moved back towards $99 a barrel.
• US nonfarm payrolls increased by 172,000 in May.
• Markets are pricing in a 25 basis-point Federal Reserve rate hike by year-end.

The FTSE 100 index closed lower on Friday, reversing earlier gains despite some positive news regarding UK inflation expectations. A Bank of England survey indicated that businesses anticipate raising prices at a slower pace, with 57% expecting to lift prices, a seven-percentage-point decrease from April. This suggested that initial inflationary pressures from higher energy costs might be easing.

However, the relief was tempered by persistent geopolitical risks and stronger US economic data. Brent crude oil prices moved back towards $99 a barrel, reflecting ongoing Middle East tensions. In the US, nonfarm payrolls increased by 172,000 in May, reinforcing the resilience of the labor market and leading to increased market pricing for a Federal Reserve rate hike, with a 25 basis-point increase now fully expected by year-end. This supported the US dollar and put global bonds under pressure.

Sector performance within the FTSE 100 showed technology stocks leading gains, up 2.1%, and personal care shares rising 1.7%. Conversely, precious metal miners underperformed, falling 2.2%. The UK construction PMI remained weak at 38.2. Geopolitical risks, particularly concerning the Strait of Hormuz, remained a key concern for markets. Domestic political uncertainty in the UK also added to the cautious backdrop.