FTSE 100 edges higher as investors balance financial recovery and AI risks

London's FTSE 100 index moved higher on Thursday, supported by a rebound in financial stocks, although gains remained constrained by ongoing tensions in the Middle East and growing investor concerns over rising corporate spending on artificial intelligence.

The blue-chip FTSE 100 climbed 0.6% to 10,316.05 points by 0917 GMT.

Meanwhile, the mid-cap FTSE 250 remained largely unchanged.

Financial stocks lead market gains

Financial companies provided the strongest support to the benchmark index during the session.

HSBC and Standard Chartered each gained around 2%, while Prudential rose 3.4%, making it one of the top performers on the FTSE 100.

The recovery in these stocks followed a challenging period for companies with significant exposure to Hong Kong.

Over the past week, such firms had come under pressure after China tightened regulations governing cross-border investments, an area that has traditionally been an important source of business for several UK-based financial institutions.

Thursday's gains suggested investors were reassessing the impact of the regulatory changes after the sharp declines recorded in recent sessions.

Technology shares under pressure

While financial stocks advanced, technology-related shares weighed on broader market sentiment.

Relx fell 1.6%, while Sage Group declined 2.5%.

The weakness mirrored losses seen among major eurozone technology companies, including SAP and Capgemini.

Investor sentiment toward the sector was affected after Oracle unveiled new debt-backed artificial intelligence spending plans.

The announcement intensified concerns about the scale of investment required to compete in the rapidly evolving AI market.

Adding to the pressure, UBS downgraded the broader European information technology sector.

Investors have increasingly questioned whether enterprise customers could shift spending away from traditional software providers and toward emerging AI-focused models and services.

Corporate developments drive individual stock moves

Among individual companies, Frasers Group rose 1% after the retailer controlled by British billionaire Mike Ashley launched a €2 billion ($2.31 billion) takeover offer for German fashion brand Hugo Boss.

Airline stocks also attracted attention.

Wizz Air gained 5.3% after reporting an operating profit that exceeded analysts' expectations.

Despite the stronger-than-expected profit performance, the airline forecast lower revenue per available seat kilometre during the first quarter.

The company attributed the outlook to disruptions related to the conflict involving Iran.

In contrast, health and safety equipment manufacturer Halma suffered significant losses.

The company's shares fell 12.6% after it projected slower organic constant-currency revenue growth for fiscal 2027.

Focus turns to central banks and geopolitical risks

Investor attention later in the day was expected to shift toward the European Central Bank's policy decision and commentary on interest rates.

Market participants were also closely monitoring developments in the Middle East, with escalating geopolitical tensions continuing to influence risk sentiment across global financial markets.

At the same time, traders were preparing for key economic data and evaluating the outlook for UK monetary policy.

According to data compiled by LSEG, markets expect the Bank of England to increase borrowing costs by 25 basis points in September as policymakers continue efforts to address price pressures.

The British pound remained relatively stable against the US dollar, trading within the mid-$1.33 to $1.34 range and holding just below the $1.34 level.

Sterling's performance reflected a combination of geopolitical uncertainty in the Middle East and investor caution ahead of significant US inflation data.