(Sharecast News) - London stocks nudged lower in early trade on Friday, with banks under the cosh after a think tank raised the possibility of a potential windfall tax on the sector, as investors eyed the latest US PCE inflation numbers.
At 0825 BST, the FTSE 100 was down 0.1% at 9,210.06.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Markets are pricing in around a high probability of a cut by the Fed next month, and today's PCE inflation numbers will be a key data point for monetary policy setters. On an annualised basis, core PCE in July is expected to have risen from 2.8% to 2.9% compared to the Fed target of 2.0%.
"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."
The US PCE numbers for July are due at 1330 BST.
On home shores, the latest Lloyds Business Barometer showed that business confidence rose in August despite a drop in economic optimism.
The index of business confidence ticked up two points to 54% this month, marking the fourth consecutive monthly increase.
Economic optimism edged down for the first time since April, however, with a three-point decline to 44%, but it remains above the long-term average of 19%.
Lloyds said the increase was driven by a five-point rise in businesses confidence in their trading prospects to 63 - the highest level since 2014.
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: "This continued upward trend in business confidence suggests UK firms remain optimistic about their own trading prospects while there is a modest cooling of confidence in the wider UK economy.
"Firms are focusing on what they can control, with many looking to pursue growth opportunities, including entering new markets and adopting new technologies. Wage expectations have seen a notable shift this month, but it remains to be seen whether this signals the start of a sustained trend or a temporary uplift, as they have been broadly stable in recent months."
In equity markets, banks were the worst performers on the FTSE 100, with NatWest, Lloyds, Barclays and HSBC all lower after the IPPR think tank suggested that chancellor Rachel Reeves should levy a new bank tax.
Richard Hunter, head of markets at Interactive Investor, said: "Overnight weakness in sterling would normally support the FTSE 100 given its proliferation of overseas earnings, but reports of a potential windfall tax on the banks more than offset any hopes of a bright open.
"Unfortunately, any such rumours are likely to have an exaggerated impact given the government's obvious need to raise more income in an attempt to mitigate its financial difficulties."
Elsewhere, engineering and consulting business Wood Group was in focus after it sold its transmission and distribution division in North America as it sheds non-core businesses ahead of its possible takeover by Sidara.
North America T&D, which provides power infrastructure engineering for substations, transmission, distribution and renewable generation across Canada and the US, is being sold to Qualus for $110m.
Market Movers
FTSE 100 (UKX) 9,210.06 -0.07%
FTSE 250 (MCX) 21,764.72 0.09%
techMARK (TASX) 5,421.05 0.11%
FTSE 100 - Risers
Rentokil Initial (RTO) 362.70p 1.83%
Fresnillo (FRES) 1,777.00p 1.65%
BP (BP.) 433.55p 1.26%
RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 1.10%
Rolls-Royce Holdings (RR.) 1,071.00p 1.04%
Anglo American (AAL) 2,284.00p 0.93%
Bunzl (BNZL) 2,512.00p 0.88%
Babcock International Group (BAB) 1,019.00p 0.79%
Smurfit Westrock (DI) (SWR) 3,415.00p 0.71%
Shell (SHEL) 2,731.50p 0.64%
FTSE 100 - Fallers
NATWEST GROUP (NWG) 516.20p -3.24%
Lloyds Banking Group (LLOY) 79.90p -2.75%
Barclays (BARC) 360.15p -2.20%
HSBC Holdings (HSBA) 948.90p -0.73%
St James's Place (STJ) 1,284.00p -0.62%
Flutter Entertainment (DI) (FLTR) 22,620.00p -0.57%
Standard Chartered (STAN) 1,370.00p -0.55%
London Stock Exchange Group (LSEG) 9,202.00p -0.54%
Legal & General Group (LGEN) 251.10p -0.48%
GSK (GSK) 1,450.50p -0.41%
FTSE 250 - Risers
Dr. Martens (DOCS) 93.00p 3.85%
Keller Group (KLR) 1,352.00p 2.44%
Computacenter (CCC) 2,366.00p 2.42%
International Workplace Group (IWG) 206.80p 1.77%
Ninety One (N91) 191.80p 1.56%
Fidelity China Special Situations (FCSS) 303.00p 1.50%
Grafton Group Ut (CDI) (GFTU) 885.80p 1.36%
Ithaca Energy (ITH) 229.25p 1.32%
Diversified Energy Company (DEC) 1,211.00p 1.25%
Harbour Energy (HBR) 230.60p 1.23%
FTSE 250 - Fallers
Rank Group (RNK) 130.00p -4.41%
Hochschild Mining (HOC) 270.20p -1.32%
Wetherspoon (J.D.) (JDW) 702.00p -1.13%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 282.00p -0.88%
Assura (AGR) 47.48p -0.88%
Tate & Lyle (TATE) 535.00p -0.83%
3i Infrastructure (3IN) 341.00p -0.73%
Aston Martin Lagonda Global Holdings (AML) 76.85p -0.65%
Crest Nicholson Holdings (CRST) 154.50p -0.65%
Oxford Nanopore Technologies (ONT) 186.00p -0.64%
29.48 (0.32%)
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