FTSE 100 snaps five-day losing streak: why the relief rally may be fragile

The FTSE 100 rose on Friday, snapping a five-session losing streak as oil prices retreated and stronger UK growth data improved sentiment towards domestic stocks.

The blue-chip index gained 0.45% to 10,656.78 by late morning, while the FTSE 250 added 0.36%. Banks led the rebound, with HSBC up 1.3% and Barclays 1.4%, while BP and Shell slipped as crude gave back part of this week’s surge.

The recovery was modest compared with the damage already done: the FTSE 100 remained on course for its biggest weekly decline since early July.

Cheaper oil reverses this week’s sector leadership

Brent fell about 2.7% to $104.70 a barrel after the Financial Times reported that Gulf foreign ministers could meet Iran’s top diplomat in Oman on Monday to discuss temporary shipping arrangements through the Strait of Hormuz.

The prospect of even a partial easing in Gulf shipping constraints was enough to take some pressure off energy prices after Brent briefly approached $110 earlier in the week.

Oil still remains sharply higher on the week, meaning the inflation threat has not disappeared.

For the FTSE 100, the move creates an unusual split. BP fell around 1% and Shell slipped 0.3% as crude retreated, but sectors hurt by expensive energy recovered.

Energy shares are still set to be among the week’s strongest performers after the oil rally.

Stronger UK growth gives banks a lift

Domestic data added another source of support. UK GDP grew 0.4% in July from June and was 1.6% higher than a year earlier, the strongest annual pace since February 2025.

The Office for National Statistics said services output rose 0.4% on the month, while production increased 0.2% and construction 0.1%.

Computer programming and consultancy output jumped 3.5%, with the ONS noting that several of the strongest businesses reported activity linked to artificial intelligence and cloud computing.

The figures helped bank shares outperform, but they also complicate the interest-rate outlook.

IG senior technical analyst Angeline Ong told The Guardian that stronger-than-expected growth gives Bank of England hawks more ammunition to argue for another increase later this year, even as gilt yields remain elevated.

US CPI still decides whether the rebound lasts

Friday’s rebound now faces a larger external test from US consumer inflation data due later in the day.

The outcome will also be closely watched by investors using ETF platforms to gain exposure to broad equity markets, as a sharp move in bond yields could quickly feed through to index-linked funds.

Markets were assigning roughly a 67% probability to a quarter-point Federal Reserve increase next week ahead of the CPI release, according to CME FedWatch data.

That follows Thursday’s hotter producer-price report, which pushed bond yields higher and revived pressure on equities.

A softer CPI print could pull yields lower and extend Friday’s relief move across London.

A hotter number would strengthen the case for tighter US policy and risk reviving the global bond selloff that has weighed on the FTSE all week.

Company-specific moves were mixed. Applied Nutrition fell 1.1% after executives sold 7 million shares, equal to 2.8% of issued capital, while Harbour Energy dropped 2.9% after BASF again reduced its stake.