FTSE 250 heads for weekly gain as Ocado jumps on Asda deal

The UK's domestically focused FTSE 250 index moved toward a second consecutive weekly gain on Friday, supported by a sharp rise in Ocado shares following a new agreement with supermarket group Asda and reports suggesting progress in efforts to extend a ceasefire between the United States and Iran.

The blue-chip FTSE 100 index rose 0.3% to 10,459.94 points by 1118 GMT and was on track to finish the week largely unchanged.

Meanwhile, the mid-cap FTSE 250 index gained 0.8%.

Ocado jumps after Asda agreement

Shares of Ocado surged 11.3% after Asda reached a deal with the technology company to overhaul its online grocery business across the UK.

The agreement boosted investor sentiment and helped lift the broader FTSE 250 index.

Ocado was among the top performers in the mid-cap benchmark during the session.

Oil prices fall on ceasefire extension reports

Oil prices dropped nearly 2% after reports indicated that the United States and Iran had agreed to extend a ceasefire and remove restrictions on shipping through the Strait of Hormuz.

The decline in oil prices had a mixed impact on major energy stocks.

Shares of Shell and BP traded in different directions as investors assessed the implications of lower crude prices and reduced geopolitical risks.

Market sentiment has improved over the past two weeks amid hopes of easing tensions between the United States and Iran.

The prospect of de-escalation has helped support domestically focused UK stocks.

Interest rate expectations continue to evolve

Investor attention also remained focused on the outlook for UK monetary policy.

Bank of England Governor Andrew Bailey said that allowing inflation to remain above the central bank's 2% target was justified given current economic uncertainty.

He also reiterated comments made last week that the Bank of England had effectively tightened monetary policy by removing the prospect of interest rate cuts.

Market pricing reflected a moderation in expectations for further policy tightening.

Money market bets showed traders were pricing in at least one 25-basis-point interest rate increase this year.

Markets also assigned nearly a 30% probability to an additional move, down from around 50% earlier in the week.

The shift in expectations has provided support for domestic equities, alongside easing geopolitical concerns.

Retail stocks decline after analyst downgrades

Not all sectors participated in the market's gains.

Shares of several UK retailers came under pressure after Deutsche Bank downgraded their ratings, citing weaker consumer spending and declining consumer confidence.

B&M, Currys, Dunelm, and Wickes Group all fell between 1.5% and 2.2%.

The declines weighed on the retail sector as investors responded to concerns about the strength of consumer demand and the outlook for household spending.

Despite weakness in retail stocks, gains in Ocado and broader optimism linked to geopolitical developments helped keep the FTSE 250 on course for a second straight weekly advance, while the FTSE 100 remained set for a broadly flat weekly performance.