By Sruthi Shankar and Bansari Mayur Kamdar
(Reuters) - Britain's top equity indexes rose on Friday and marked their strongest monthly performance of 2022, as a jump in commodities and a slew of upbeat earnings reports from companies like NatWest outweighed economic slowdown worries.
The blue-chip FTSE 100 gained 1.1% while the domestically focussed midcap FTSE 250 climbed 1.6%, both holding at seven-week highs.
NatWest rose 8.1% after the bank raised its full-year forecast and made a bumper payout to shareholders, lifting the banking index 1.5% higher.
"The sector’s earnings so far have benefited from the rising rate environment and volatile financial markets that have boosted trading activity," said Victoria Scholar, head of investment at Interactive Investor.
But she added that there were concerns for financial stocks due to the shaky British macroeconomic outlook for the second half, with fears of a recession and inflation close to double digits.
"For lenders like Standard Chartered and HSBC with an Asian pivot there are also concerns about China’s draconian zero-tolerance to COVID approach that is leading to an economic slowdown," she said.
Standard Chartered slipped 0.5% even as its first-half pre-tax profit rose 19% and beat market expectations. Investors eyed results from its larger peer HSBC on Monday.
GRAPHIC: Banks outperform the blue-chip FTSE 100 this year, up 5.5% YTD (https://fingfx.thomsonreuters.com/gfx/mkt/klpykyarepg/BanksFTSE.PNG)
All eyes are on the Bank of England's meeting next week, with a Reuters poll of economists forecasting another 25-basis-point increase to tame inflation running at a four-decade high.
Still, global markets have recovered this month as signs that the Federal Reserve could slow the pace of interest rate hikes and better-than-expected earnings reports from tech giants boosted sentiment.
The FTSE 100 posted its best monthly showing since December 2021, while the midcap index was looking at its best month since November 2020.
Oil majors BP and Shell climbed more than 2.5% each, while miners added 2.7%, tracking firm commodity prices. [O/R] [MET/L]
British Airways-owner IAG fell 2.6% even though it returned to profit for the first time since the outbreak of the COVID-19 pandemic, led by demand for European flights.
Jupiter Fund Management slid 2.4% as the asset manager reported a fall in half-yearly profit, hit by rising outflows as key global markets buckled under geopolitical tensions and inflationary concerns.
(Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; Editing by Vinay Dwivedi, Subhranshu Sahu and Hugh Lawson)