Chancellor's Dilemma: Banking Stocks Tumble Amid Tax Proposal

London's equity market faced a downward trend on Friday, spurred by a decline in heavyweight banking stocks. This shift came after an influential think tank proposed taxing the interest banks receive on reserves held at the central bank.

As the blue-chip FTSE 100 decreased by 0.4% early in the trading session, it marked its fourth consecutive day of losses, setting it on course for its most significant weekly drop in nearly five months. The Institute for Public Policy Research highlighted that taxing the billions banks get in interest could offer finance minister Rachel Reeves more leeway in adhering to fiscal rules.

The sell-off affected notably banking stocks, with NatWest and Lloyds each dropping 4.5%, while Barclays fell 3.7%. In contrast, defense stocks offered some support, as political tensions seemed to reduce the likelihood of talks between Russian and Ukrainian leaders, boosting shares in Rolls-Royce and Babcock.

(With inputs from agencies.)