Petra Diamonds downgraded to ’SD’ by S&P after debt restructuring

Investing.com -- British stocks closed lower on Friday as the pound held firm against the dollar, with analysts saying the recent rally reflects a short squeeze rather than a fundamental reassessment of UK sovereign risk, while broader European markets traded mixed.

The blue-chip index FTSE 100 declined 0.5% and the British GBP/USD was flat against the dollar, remaining above 1.33.

The DAX index in Germany rose 0.7%, and the CAC 40 in France declined 0.1%.

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UK round up

Bank of America has adjusted its European energy sector outlook for 2026, downgrading Shell PLC (AS:SHEL) and BP PLC (LON:BP) while double-upgrading Neste Oyj (HE:NESTE) as it positions for a "soft landing" in a $60 Brent oil price environment.

The bank’s analysts predict that lower oil and gas prices combined with declining refining margins will put pressure on free cash flow next year. They note that share prices across Europe’s major oil companies already reflect approximately $65 Brent long-term, suggesting limited potential for significant gains.

Shell shares were down 1.4%, while BP fell 2.6%.

In separate moves affecting UK-listed companies, Elementis PLC (LON:ELM) shares rose 4.1% after Bank of America upgraded the specialty chemicals company from Neutral to Buy. BofA increased its price target on Elementis from 170p to 200p, citing new management and strategic repositioning as growth drivers under CEO Luc van Ravenstein’s leadership.

Meanwhile, MONY Group PLC (LON:MONY) stock fell 2.9% following Morgan Stanley’s downgrade to Equal-weight from Overweight. The investment bank expressed concerns about how "agentic AI" might impact the UK price comparison website operator’s business model. Morgan Stanley maintained its 220p price target, representing about 15% upside potential, but indicated a lack of near-term catalysts for the stock.

Ocado Group PLC shares jumped around 10% in early London trading before closing just 0.3% higher after the company announced it will receive a $350 million cash payment from Kroger.

The payment comes after the U.S. retailer decided to close three robotic fulfillment centers and cancel plans for another site. Kroger will make the payment in January, reflecting its decision to shut three customer fulfillment centers (CFCs) in early 2026 and abandon the planned Charlotte, North Carolina facility.

In other UK market news, shares of Big Yellow Group PLC (LON:BYG) fell 4.3% after Blackstone Europe announced it would not proceed with a takeover offer for the company. The decision follows Big Yellow’s announcement on Thursday that it had concluded there was "no basis to continue discussions" with Blackstone and would not extend the put-up or shut-up deadline of December 8, 2025.

Blackstone confirmed in a regulatory filing that it has no intention to make an offer for Big Yellow, triggering restrictions under Rule 2.8 of the City Code on Takeovers and Mergers.

The UK housing market showed signs of cooling as house prices held steady in November, showing no monthly change after a 0.5% rise in October, according to the Halifax House Price Index. The average property price edged up by just £139 to reach £299,892, marking another record high despite the slowdown in growth momentum. Annual price growth decelerated to 0.7%, down from 1.9% in October, the weakest rate since March 2024.

In currency markets, sterling continues its upward trend. ING analysts suggest the current rally represents a short squeeze rather than a fundamental reassessment of UK sovereign risk. The bank noted that the 10-year Gilt swap spread has maintained its modest narrowing and currently stands at 48 basis points, down from 58 basis points in late September.

ING maintains a year-end GBP/USD target of 1.34 but expects some sterling underperformance against the euro as the Bank of England resumes its easing cycle this December.

In analyst actions, J.P. Morgan initiated coverage of UK food-to-go chain Greggs PLC (LON:GRG) with an "overweight" rating and a 2,110p December 2027 price target. This implies about 35% upside from the stock’s 1,590p close on December 4. The bank cited a valuation that has fallen to trough levels despite what it describes as sector-leading operating metrics and clear catalysts for recovery.

Separately, J.P. Morgan has adopted a more cautious stance on European oil and gas equities heading into 2026, citing tighter valuations and projected oil oversupply pressures.

In its EU Oils 2026 Outlook released Friday, the brokerage noted that the sector experienced "significant positive decoupling" during the second half of 2025. European oil stocks outperformed the broader European market by 6% despite weakening crude benchmarks, with Brent declining 7% during the same period.

J.P. Morgan now considers valuations to be "full," pointing to an estimated 2026 free cash flow yield of 7.8% at $62/bbl Brent, which it describes as rich compared to long-term averages.

Halma PLC (LON:HLMA) has acquired E2S Group Ltd for £230 million in cash, expanding its presence in industrial safety markets.

The acquisition will be funded from Halma’s existing facilities and supports the company’s continued expansion into fire detection and alarm systems.

Investing.com – U.K. stocks were lower after the close on Friday, as losses in the Fixed Line Telecommunications, Oil & Gas Producers and General Industrial sectors led shares lower.

At the close in London, the Investing.com United Kingdom 100 declined 0.53%.

The best performers of the session on the Investing.com United Kingdom 100 were Rightmove PLC (LON:RMV), which rose 3.33% or 17.40 points to trade at 540.20 at the close. Meanwhile, Unite Group PLC (LON:UTG) added 2.81% or 14.50 points to end at 530.00 and JD Sports Fashion PLC (LON:JD) was up 2.76% or 2.22 points to 82.72 in late trade.

The worst performers of the session were Frasers Group PLC (LON:FRAS), which fell 3.62% or 25.50 points to trade at 678.50 at the close. Smiths Group PLC (LON:SMIN) declined 3.50% or 86.00 points to end at 2,372.00 and BP PLC (LON:BP) was down 2.61% or 12.15 points to 452.85.

Rising stocks outnumbered declining ones on the London Stock Exchange by 986 to 722 and 599 ended unchanged.

Gold Futures for February delivery was up 0.05% or 2.30 to $4,245.30 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in January rose 0.67% or 0.40 to hit $60.07 a barrel, while the February Brent oil contract rose 0.71% or 0.45 to trade at $63.71 a barrel.

GBP/USD was unchanged 0.02% to 1.33, while EUR/GBP unchanged 0.08% to 0.87.

The US Dollar Index Futures was up 0.06% at 99.01.