British Equities Recover from Friday's Selloff, Led by Bank Shares Rallying

British equities rebound from Friday's selloff, with the FTSE 100 rising 0.5% and the FTSE 250 gaining 0.6%. Bank shares surge 2.1%, led by Lloyds Banking Group's 7.4% jump. Aerospace and defense stocks also gain 2.2%, while BP rises 1.3% after announcing its largest oil and gas discovery in 25 years in Brazil. The Bank of England is expected to cut its key interest rate to 4% on Thursday.

The FTSE 100 rebounded on Monday, recovering from Friday's 0.7% drop, with the index rising 0.5%. The FTSE 250 gained 0.6% as bank shares surged 2.1%, led by Lloyds Banking Group's 7.4% jump [1]. The positive sentiment was driven by a better-than-feared outcome from the UK’s motor finance investigation, with the Financial Conduct Authority (FCA) estimating potential compensation at £9 billion, well below the £30 billion worst-case scenario [1].

Lloyds, which has the largest exposure, jumped 7.7%, rebounding after months of underperformance versus peers. Barclays gained over 2%, while NatWest rose more than 1%. HSBC and Standard Chartered also climbed around 1% [1]. The miners added support as copper and gold prices rose, with Antofagasta up 1.8%, Glencore 0.7%, and Endeavour Mining 1.7% [1].

However, the index was capped by losses in the pharmaceutical sector. AstraZeneca fell over 1% after US President Trump sent letters to 17 drugmakers last week demanding price cuts, sparking pressure across the pharmaceutical space [1]. The Bank of England is expected to cut its key interest rate to 4% on Thursday.

BP rose 1.3% after announcing its largest oil and gas discovery in 25 years in Brazil. The discovery, located in deep waters about 400km off the Brazilian coast, is BP's 10th oil discovery of the year and could be its largest since its discovery at the Shah Deniz gas field in Azerbaijan in 1999 [4]. The Santos basin oil and gas discovery is likely to play a significant role in BP's plan to increase its oil and gas production to between 2.3m to 2.5m barrels of oil equivalent a day.

Aerospace and defense stocks also gained 2.2%, contributing to the overall rebound in the FTSE 100 [1].

References:
[1] https://www.tradingview.com/news/te_news:474947:0-ftse-100-starts-week-higher/
[2] https://www.reuters.com/business/finance/british-bank-shares-jump-after-supreme-court-ruling-car-loan-claims-2025-08-04/
[3] https://www.yorkshirepost.co.uk/business/motor-finance-court-ruling-shares-soar-at-lloyds-banking-group-and-close-brothers-5255190
[4] https://www.theguardian.com/business/2025/aug/04/bp-makes-major-oil-and-gas-discovery-off-coast-of-brazil-santos-basin