UK stocks finished with solid gains on Tuesday, having traded within a narrow range over recent sessions, with eyes firmly fixed on chancellor Rachel Reeves ahead of her crucial Autumn Budget expected on Wednesday.
The FTSE 100 closed 0.8% higher at 9,609.53, tracking solid performances across Europe. The UK benchmark had moved more or less sideways since hitting a one-month low on 19 November.
Despite the gains, trading in London was "volatile [...] as investors eagerly awaited the upcoming Budget announcement, expected to introduce significant tax measures", according to Patrick Munnelly, partner of market strategy at Tickmill Group.
Meanwhile, the pound was up 0.5% against the dollar at 1.3175 by the close of play in London, rising for the fourth straight session, "with traders turning to the options market to hedge against potential volatility", Munnelly said.
However, according to Chris Beauchamp, chief market analyst at IG, Sterling's move higher against the dollar was more likely a sign of "greenback weakness than a sudden surge of irrepressible optimism about the UK economy as the clock ticks down to the long-awaited/dreaded Budget".
Along with a host of expected tax changes, the Budget is expected to be accompanied by a downgrade to growth projections by the Office for Budget Responsibility. According to reports, the OBR is tipped to slash GDP forecasts for every year of the current parliament (to 2029-30).
Uncertainty ahead of the Budget was also linked to another drop in UK retail sales in November, with the CBI's latest distributive trades survey on Tuesday showing that the net balance for sales volumes - the percentage of retailers reporting an increase minus those reporting a decrease - fell five points to -32.
As well as persistently sticky inflation and historically high interest rates, Wednesday's Budget is considerably later than normal, and mounting speculation in its lead-up has weighed heavily on already weak consumer sentiment.
Kingfisher surges on guidance upgrade
B&Q owner Kingfisher shot to the top of the index as it upgraded its full-year outlook despite market conditions softening in the UK and Poland during the third quarter. Profit guidance was lifted to between £540m to £570m, from £480m to £540m.
Lloyds, NatWest and Barclays rallied after the Financial Times reported that Chancellor Reeves was preparing to spare the sector from a tax raid in Wednesday's Budget.
On the downside, insurer Beazley tanked as it cut its forecast for growth in full-year insurance written premiums to flat to low single digits. In first-half results in August, the company had guided to FY premium growth of low-to-mid single digits.
Intertek slumped after group organic growth for July to October came in slightly weaker than expected at 4.1%, versus consensus of 4.5%.
Low cost airline easyJet flew lower even as it upgraded forecasts for its holiday division after posting a 9% rise in full-year pre-tax earnings to a better-than-expected £655m.
Catering firm Compass fell despite reporting strong underlying sales growth in the fiscal year to 30 September, driven by a solid performance in North America and good client retention.