Sterling slipped back below $1.35 after a surprise by-election result delivered a jolt to UK politics, but markets largely kept their composure: gilts held steady and the FTSE 100 pushed to another record high as miners and a sweeping buyback wave powered London stocks.
The headline move in currencies looked modest on the day — the pound was down about 0.1% earlier, then clawed back to trade slightly higher against the dollar — yet the broader picture has turned more uncomfortable for sterling. Over February, the pound has tracked toward a depreciation of roughly 1% against both the euro and the dollar, marking its weakest monthly performance since June versus the euro and since October versus the dollar. Even where it is eking out a small weekly gain against the greenback, the backdrop is a broadly softer US dollar, leaving the pound among the weaker major peers on the week, lagging only the Canadian dollar and the Japanese yen.
Against the euro, the tone has been firmer: sterling has been on course for a fourth straight weekly decline, at one point sliding to its weakest level in more than two months before recovering to trade close to flat. Options markets have signaled investors positioning for additional downside versus the single currency, even as spot trading steadied.
By-election upset lands a political shock, markets keep perspective
The political catalyst was a special election in the Manchester constituency of Gorton and Denton. Hannah Spencer captured 40.7% of the vote to deliver a historic win for the Greens — the first time the party has won a by-election and the first time it has taken a seat in northern England. The result represented a 26% swing from Labour in a constituency the governing party had held comfortably on a 37-point majority just 19 months earlier.
The win increases the Greens’ parliamentary representation to five MPs, behind Reform’s eight. By-elections often act as a pressure valve for voter dissatisfaction, but both the defeat and the margin gave the result extra weight, underscoring a growing threat to the government from its left flank.
In markets, the initial read-through was restrained. The pound dipped early, while gilts edged fractionally higher — a nod to a slightly raised political risk premium — but the moves were measured, suggesting investors did not see a decisive new risk regime forming overnight.
Gilts steady as supply expectations shift into focus
In UK rates, the early drift faded quickly. Yields were flat at the short end, and the longest maturities were up only around 0.5 basis point. The lack of follow-through reinforced a view that traders were focused less on the by-election headline and more on the supply-and-fiscal picture into the new week.
One supportive pillar has been rising expectations that the UK will cut the volume of bond issuance in the year ahead. A survey of primary dealers pointed to gross gilt sales of about £245 billion for the 2026–27 fiscal year — a drop of roughly £59 billion, or about 20%, from the current year and the lowest level in three years. If confirmed, a lower remit can ease pressure on borrowing costs by reducing the supply burden that investors must absorb. For an overview of issuance announcements and remit details, investors typically track the UK Debt Management Office’s official publications at the Debt Management Office.
Market attention is also shifting to next week’s checkpoint on the government’s standing versus its fiscal rules, due next Tuesday. The bond market’s calm — including earlier moves that saw 10-year yields return to the lowest since the end of 2024 and longer-dated yields fall to levels last seen since April — has been an encouraging signal for policymakers watching funding conditions.
Confidence slips again as households stay cautious
On the domestic data front, UK consumer confidence slipped for the first time in three months. The latest GfK reading eased to -19 from -16, still deeply negative and consistent with the subdued mood that has persisted for years. Measures linked to the wider economic outlook and major purchases remained in negative territory, with major purchase sentiment deteriorating. The sole bright spot was households’ assessment of their own financial situation over the coming 12 months, which stayed positive.
FTSE 100 records extend as buybacks dominate earnings season
Equities, meanwhile, leaned into a very different narrative: momentum. The FTSE 100 rose about 0.1% to another all-time high, outperforming many European peers, while the FTSE 250 climbed around 0.3%. A rebound in metals prices kept miners in the lead — with names such as Rio Tinto, Anglo American and Glencore helping lift the index — while precious metals producers Fresnillo and Endeavour also rallied alongside firmer gold and silver.
The season’s defining feature has been the scale of buybacks. Across Europe, members of the Stoxx 600 have already announced a record amount of repurchases for the January–February period, led by technology, financial and industrial companies, with March often the peak month. In the UK, buybacks have been particularly prominent, with companies highlighting discounted valuations as a reason to return cash to shareholders.
Rolls-Royce took early headlines with plans for up to £9 billion of buybacks through 2028, while London Stock Exchange Group won plaudits for a £3 billion program. Further announcements kept the theme alive: IAG unveiled a new €1.5 billion buyback alongside an upbeat outlook and strong travel trends; Rightmove paired higher revenue and profit with a buyback; and other names across the market continued to follow suit.
Single-stock movers: Rightmove, Senior, Rathbones jump; Melrose, Hays slide
Among notable movers, Rightmove rose about 5% after reporting results alongside a buyback, helping it stabilize around the threshold that can determine FTSE 100 membership during index reviews. The company highlighted its push into artificial intelligence, pointing to 31 live AI initiatives and products, including partnerships with ChatGPT and a collaboration with Google Cloud. It also cited membership growth of 2% last year and a housing backdrop that could benefit from expected interest-rate cuts over the year.
Senior surged about 20% after saying it has received multiple takeover approaches and that discussions are ongoing, while Rathbones jumped roughly 11% on results that topped expectations, with management flagging improving margins ahead. On the downside, Melrose Industries fell around 7% after a cautious tone around the year’s outlook despite announcing a £175 million buyback. Hays dropped about 5% as it reported a 9% fall in net fees and announced CEO Dirk Hahn would step down immediately for personal reasons, with Mark Dearnley named interim CEO; the company described permanent hiring as tough but stable, with activity back to pre-Christmas levels.
Pearson reiterated medium-term guidance and emphasized AI-powered learning among 2026 priorities, while also announcing a CFO transition, and activist investor Elliott praised LSE Group’s disclosures and AI communication while signaling it wants ongoing dialogue on value-boosting measures.
For now, the UK trading day is defined less by the political shock and more by a familiar market blend: a fragile pound under pressure versus the euro, a steady gilt curve supported by shifting supply expectations, and an equity market powered by miners and a buyback boom that continues to rewrite the tone of earnings season.
