FTSE 100 banking stocks are under pressure after a think tank urged Rachel Reeves to consider tax raid on major firms such as Barclays, Lloyds and NatWest.
Meanwhile, stock market sentiment will be tested later when figures in the US show the impact of tariffs on the prices of goods and services.
The US personal consumption expenditure release is a key data point for Federal Reserve policymakers ahead of a potential September interest rate cut.
FTSE 100 Live Friday
- Call for new levy on banks
- US inflation figures in focus
- Frasers Group appoints chair
Market update: Tax raid fears hit bank shares, FTSE 100 weakens
09:46 , Graeme EvansThe shares of UK lenders today fell sharply as fears of a fresh tax raid on the banking industry rounded off a lacklustre week for the FTSE 100 index.
NatWest slumped 5% or 25.2p to 511.4p, Lloyds Banking Group reversed 4% or 3p to 79.3p and Barclays fell 3% or 12.7p to 355.95p. All three stocks have soared in value this year.
Today’s reverse came as a report by the Institute for Public Policy Research fuelled speculation that Rachel Reeves will target the sector in her autumn Budget.
The think-tank said the Chancellor should look to recover taxpayer money spent on compensating losses from the Bank of England’s cash-printing drive.
It points out that the UK is an international outlier by having its Treasury pay for central Bank losses on its bond-buying quantitative easing (QE).
After a period of making profits on this QE programme, the Bank of England is facing record losses, estimated to cost the taxpayer £22 billion a year as interest rates have risen since 2021.
This money is then partly being funnelled to bank shareholders due to a “flawed” policy design, boosting profits while millions across Britain continue to face cost-of-living pressures, the report said.
It recommends the Treasury introduce a “QE reserves income levy”, which could raise up to £8 billion for public services.
The UK lenders were the worst performers in a session when the FTSE 100 index lost more ground by shedding 0.2% or 23.30 points to 9193.52.
The top flight has fallen back from last week’s intraday record of 9357.51, even though the S&P 500 index has posted a series of all-time highs.
Today’s weakness also reflected cautious positioning ahead of US personal consumption expenditure figures for July, which are a key data point for Federal Reserve policymakers.
Other fallers in London’s top flight included Diageo after a decline of 20p to 2043p and Legal & General with a reverse of 2.6p to 249.6p.
Asia-focused lenders Standard Chartered and HSBC fared better than their UK counterparts, falling by 16.5p to 1358.5p and 10.8p to 945p respectively.
Rentokil Initial led the top flight with a gain of 8.3p to 364.3p and Rolls-Royce lifted 14p to 1072.5p.
Former audit chief takes on Frasers role
08:49 , Graeme EvansThe former head of Britain’s audit watchdog has been named as chair of Mike Ashley’s Frasers Group.
Sir Jon Thompson succeeds David Daly, who steps down after eight years in the role.
Frasers appointed ex-Financial Reporting Council boss Sir Jon to the board as a non-executive director in June and was widely reported to be lining him up to take over from Mr Daly this year.
Sir Jon will take on the role on Monday, with Mr Daly stepping down from the board at the retailer’s AGM on 24 September.
Banking stocks hit by windfall tax fears, NatWest down 4%
08:24 , Graeme EvansPressure on Rachel Reeves to consider hiking a windfall tax on UK banks today fuelled a weaker session for UK-focused lenders in the FTSE 100 index.
Lloyds Banking Group fell 3% or 2.1p to 80.1p and NatWest by 4% or 21p to 515.6p.
Among the international players, Barclays fell 9.25p to 359.4p and HSBC declined 8.1p to 947.7p.
The selling contributed to another downbeat session for the FTSE 100 index, which declined 8.83 points to 9207.99.
On the risers board, Rentokil Initial lifted 6.6p to 362.6p and Rolls-Royce advanced by 12p to 1070.5p. BP added 4.25p to 433.35p.
US inflation data set to provide steer on rates outlook
07:42 , Graeme EvansThe release of US personal consumption expenditure figures for July later today represent a key data point for Federal Reserve policymakers.
US markets are pricing in a 85% chance of an interest rate cut by the Fed next month, with the focus on the potential of further moves later in the year.
On an annualised basis, core PCE in July is expected to have risen from 2.8% to 2.9% compared to the Federal Reserve’s target of 2%.
Derren Nathan, Hargreaves Lansdown head of equity research, said: “Markets are keeping a close eye on the impact of tariffs on the prices of goods and services.
“If inflation comes in hotter than expected, the path towards a drop in US borrowing costs in December will become a little less clear.”
Recoup QE losses with bank levy - IPPR
07:08 , Graeme EvansRachel Reeves should tax bank windfalls to recover taxpayer money spent on compensating losses from the Bank of England’s cash-printing drive, an influential think tank has said.
Hiking a levy on the profits from major firms such as Barclays, Lloyds, HSBC and NatWest could raise up to £8 billion a year for public services, according to a report by the Institute for Public Policy Research (IPPR).
The think tank argues the UK is an international outlier in having its Treasury pay for central Bank losses on its bond-buying quantitative easing (QE) programme.
FTSE 100 set for subdued start, S&P 500 at new record
07:02 , Graeme EvansThe S&P 500 index last night closed above 6500 for the first time after updated GDP figures boosted confidence in the resilience of the US economy.
The Dow Jones Industrial Average advanced 0.2% and the Nasdaq Composite ended up 0.5%, although Nvidia finished 1% lower following Wednesday’s results.
The FTSE 100 index underperformed global markets yesterday by losing 0.4% or 38.68 points at 9216.82.
IG Index futures trading points to a subdued start at today’s opening bell.
The focus later today is on US personal consumption expenditure figures for July, which are the Federal Reserve’s target measure of inflation.
