UK midcaps end higher but rate jitters persist

LONDON: The UK’s midcap stocks ended higher on Thursday, rebounding from a more-than-eight-month low touched earlier in the session, as a selloff in bond markets kept investors on edge, while retail stocks were hammered by disappointing Christmas trading updates.

Marks and Spencer reported a better-than-expected rise in like-for-like food sales in the Christmas trading period, but it warned of cost and economic headwinds this year, sending its shares down 8.4%.

Tesco, Britain’s biggest supermarket group, dipped 0.5% after it maintained its full-year profit outlook.

The retail index dropped 1.3% to a near one-year low, with discount retailer B&M tumbling 8.5% after it lowered the top end of its annual profit forecast.

Greggs Plc shed 15.8% after the baker and food-to-go retailer reported a modest 2.5% growth in fourth-quarter like-for-like sales, as tight-pursed Christmas shoppers indulged in fewer Festive Bakes, sausage rolls, and gingerbread lattes.

Still, the FTSE 250 index of domestically oriented stocks closed up 0.3%, having dropped as much as about 1% during the session.

Midcap stocks have been pressured by a sharp rise in British borrowing costs this week on concerns about high borrowing in Britain and higher taxes on businesses planned by finance minister Rachel Reeves.

“The year ahead won’t be all smooth sailing for the retail giants, as the sector gears up to battle imminent tax hikes,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

The benchmark 10-year gilt yields have spiked by a quarter point this week alone to their highest since 2008, while the 30-year gilts hit its highest since 1998.

However, a 0.6% slide in the pound supported the exporter-heavy FTSE 100, which was up 0.8% at a near four-week high.

Miners such as Antofagasta, Anglo American, Rio Tinto rose between 1.8% and 3.3% as metal prices edged higher.

Concerns about US President-elect Donald Trump’s tariff plans and stronger-than-expected US economic data in recent days have fuelled concerns about resurgent inflation, prompting traders to scale back their expectations on the scale of rate cuts this year.