UK stocks set for weekly declines as oil prices soar

UK Stocks Head for Weekly Declines Amid Soaring Oil Prices and Inflation Worries

Market Overview and Key Drivers

Oct 23 (Reuters) - UK stocks were set for weekly declines on Friday, as oil prices hit over five-month highs this week, weighing heavily on risk appetite, while investors parsed a slew of corporate earnings and economic data through the week.

The blue-chip FTSE 100 index fell 0.5% to 10,670 points by 1020 GMT. The midcap FTSE 250 was up 0.1%, but was set for its sharpest weekly fall in nearly six weeks.

Sector Performance Highlights

Energy and Commodities

• Oil prices hit their highest levels in over five months, with Brent crude trading close to $114 a barrel. This lifted energy shares 2%

Aerospace and Defence

• Aerospace and defence shares dropped 4.1%, falling to their lowest levels since late May, with Rolls-Royce bottoming the FTSE 100 with a 6.4% slide

• French rival Safran dropped 8% on worries that a slowdown in aftermarket sales growth could continue into 2027, with airlines cutting capacity amid high fuel prices

Banking and Healthcare

• Bank and healthcare sectors fell 1% and 1.7%, respectively, further bogging down the index

Macroeconomic Factors

Inflation and Interest Rates

• Rising oil prices have spurred inflation concerns in the global economy, with domestic data this week showing price pressures increased more than expected in September

• An interest rate hike by the Bank of England in November is largely priced in, with the data supporting the case

• Elevated oil prices, growing bets on rate hikes and uncertainty ahead of the budget have set the indexes up for weekly declines

Retail and Consumer Sentiment

• British retail sales volumes fell 0.4% in September from August, worse than the 0.1% decline expected by economists, data showed on Friday

• Separate data showed consumer confidence plunged in October, its steepest monthly fall since the pandemic

Outlook and Notable Movers

Upcoming Budget

• Markets will be looking forward to finance minister John Healey's budget next week

Individual Stocks

Insurance Sector

• Among individual movers, insurer Lancashire Holdings fell 4% after Barclays cut its rating to "underweight" from "equal weight"

(Reporting by Darshan Kumar and Purvi Agarwal in Bengaluru; Editing by Maju Samuel)