London shares trim weekly losses after boost from banks

London Shares Rebound After Banks Lift FTSE Despite Weekly Losses

FTSE Indexes Recover Amid Volatility in Banking and Energy Sectors

Sept 11 (Reuters) - Financials led London's FTSE indexes slightly higher on Friday, ending a week-long sell-off caused by nervousness about the economic impact of the U.S.-Israeli war on Iran and high oil prices.

The blue-chip FTSE 100 index closed up 0.4%, but logged its biggest weekly loss since late July. The midcap FTSE 250 finished 0.4% higher too and marked its sharpest weekly decline in more than four months.

Banking Sector Drives Gains

• Heavyweight banks rebounded after three sessions of declines, with HSBC and Barclays up 1.5% and 1.9% respectively.

Investor Sentiment and Market Volatility

• "There were cautious gains for some of the names caught up in the recent volatility... Banks were also in demand as rates look set to stay higher for longer," said Russ Mould, investment director at AJ Bell.

Performance of Other Sectors

Construction and Materials Stocks

• Construction and Materials stocks rose 1.8%, making them the biggest percentage gainers.

Energy Sector Movements

• Sentiment rallied after a 2% drop in oil prices on Friday following a report that Gulf foreign ministers could meet their Iranian counterparts to discuss temporary shipping arrangements in the Strait of Hormuz. [O/R]

• The broader energy sector has gained the most this week after oil climbed above the psychological $100 mark.

Economic Data and Market Impact

UK Economic Growth

• Data showed the economy grew at the fastest annual pace in 18 months in July on a possible AI boost, further improving sentiment.

Inflation and Rate Hike Expectations

• Nervousness about the impact of oil prices on inflation is high.

• Traders price in 44 basis points of rate hikes by the Bank of England by year-end, up from around 25 bps two weeks ago, LSEG data showed.

US Inflation Data

• Investors also assessed U.S. data that showed consumer inflation rose the most in four months in August, reinforcing expectations that the Federal Reserve will raise interest rates next week.

Notable Stock Movements

Major Decliners

Telecom Sector

• Among the losing stocks, telecom company Gamma Communications fell 2.9% after Dutch private equity firm Waterland ended plans to team up with Giacom for a takeover offer.

Energy Sector

• Harbour Energy underperformed by 1.9% after its biggest shareholder BASF reduced its stake.

Bond Market Developments

• The global bond rout also paused on Friday and gilts staged a partial recovery.

(Reporting by Anand Gopal and Purvi Agarwal in Bengaluru; Editing by Diti Pujara and Barbara Lewis)