The FTSE 100 ended the week on a slight downturn, closing at 10,868.05 after hitting a record intraday peak earlier in the session. Despite this drop, the index has shown resilience, gaining 1.2% over the past week. Investors have begun to take profits amid rising bond yields, particularly as NatWest emerged as a standout performer, bolstered by a positive earnings outlook for 2026.
Market Overview
On Friday, the FTSE 100 index fell by 29.22 points, or 0.3%. Earlier in the day, it reached an impressive new high of 10,989.45. The FTSE 250 index also experienced a dip, closing down 104.12 points (0.4%) at 23,975.02, while the AIM All-Share index fell by 2.35 points (0.3%) to close at 762.55.
Overall, the week proved to be a mixed bag: the FTSE 100 saw a 1.2% increase, the FTSE 250 rose by 0.7%, but the AIM All-Share experienced a decline of 1.2%.
NatWest Leads the Pack
NatWest emerged as a key player on the FTSE 100, climbing 3.2% after announcing an upward revision of its guidance for 2026. The bank is contemplating a new share buyback programme, set to be discussed during its upcoming annual results, six months ahead of schedule. This positive momentum can be attributed to robust second-quarter performance, which surpassed analysts’ expectations.
Investment Director at AJ Bell, Russ Mould, noted that this marks the fifth consecutive time NatWest has outperformed consensus forecasts since the government divested its remaining stake last May. “The sustained high-interest rate environment has certainly contributed to this success, alongside the bank’s strategic initiatives,” he commented.
Setbacks for IG Group and Sainsbury’s Strategic Moves
In contrast, IG Group faced significant headwinds, plummeting 14% to become the worst performer on the FTSE 100. This decline follows the announcement of its $1.3 billion acquisition of Underdog, a US-based fantasy sports and prediction markets operator. Despite a commendable revenue increase of 18% to £642.8 million for the first half of 2026, investors reacted negatively to the acquisition’s implications.
Meanwhile, J Sainsbury’s stock rose by 1.0% after revealing it had agreed to sell its Argos business for £120 million. This transaction, which falls short of the original purchase price, allows Sainsbury’s to concentrate on its core food operations. JPMorgan analyst Borja Olcese remarked that the divestment was a long-overdue decision for Sainsbury’s, which has historically lagged behind rival Tesco in terms of valuation.
Bond Yields and Inflation Concerns
As traders digested corporate news, attention shifted to rising bond yields. The yield on the US 10-year Treasury increased to 4.74%, and the 30-year Treasury yield rose to 5.27%. In London, the yield on 10-year gilts also climbed to 5.05%. These movements come as Federal Reserve policymakers expressed concerns over inflation, with dissenters advocating for immediate rate hikes to prevent entrenched inflationary pressures.
“Inflation has been too high for too long,” stated Cleveland Fed President Beth Hammack, emphasising the need for proactive measures. Her colleague, Neel Kashkari, echoed this sentiment, suggesting that a series of incremental policy adjustments might be more effective than waiting for more decisive action later.
Looking Ahead
On the currency front, the pound strengthened against the dollar, trading at 1.3463, and gained against the euro at 1.1702. Chancellor John Healey is set to unveil his first budget on October 28, aiming to decentralise power and provide economic stability for businesses and families alike.
In European markets, the CAC 40 in Paris closed up 0.3%, while the DAX 40 in Frankfurt increased by 0.1%. Across the Atlantic, the Dow Jones Industrial Average recorded a modest gain of 0.2%, whereas the S&P 500 and Nasdaq Composite remained stable.
Why it Matters
The fluctuations in the FTSE 100 and the broader market underline the delicate balance investors must navigate amid rising bond yields and varying corporate performances. The strong showing from NatWest signals confidence in the banking sector, while the challenges faced by IG Group highlight the risks associated with strategic acquisitions. As inflation concerns loom, market participants will be watching closely for guidance from central banks and government budgets, as these factors will significantly influence market sentiment moving forward.