UK stocks fall on concerns over state finances after costly U-turns

July 2 (Reuters) - British stocks fell on Wednesday, part of a wider selloff of UK assets, amid rising concerns over public finances after finance minister Rachel Reeves appeared in tears in parliament following a series of costly U-turns on welfare reforms.

The blue-chip FTSE 100 .FTSE lost 0.1%, while the domestically-focussed midcap index .FTMC declined 1.3%, widely underperforming European peers.

Concerns over Reeves surfaced after her distressed appearance during a session of Prime Minister's Questions in the House of Commons, a day after the government's welfare reform bill was approved only after excluding measures that would have led to fiscal savings in the long run.

Prime Minister Keir Starmer's press secretary tried to quell rumours that Reeves might be replaced by saying "the chancellor is going nowhere, she has the prime minister's full backing".

Asked about Reeves, a Treasury spokesperson said it was a "personal matter" that had caused her distress.

Government bond prices fell by the most since October 2022 and the pound GBP=D3 dropped by more than 1%.

"This is a sign of fiscal stress, which the UK has had to weather before," said Kathleen Brooks, research director at XTB.

"The FTSE 100 is less exposed to domestic policies; however, the FTSE 250 is down. With all the main UK asset classes under stress today, the government needs to be careful about its next steps."

Household goods and home construction index .FTNMX402020 declined 5.9%, leading sectoral losses. Bellway BWY.L fell 8%, while Taylor Wimpley TW.L lost 4%

Industrial metals and mining stocks .FTNMX301010 led gains on the chart, tracking higher metal prices. Ferrexpo FXPO.L rose 3.6% and Antofagasta ANTO.L added 4.2%. Glencore GLEN.L rose 5.1%, also aided by $1 billion share buyback starting.

Oil and gas companies .FTNMX601010 gained 2%, with heavyweights BP BP.L and Shell SHEL.L adding 3.2% and 1.7% each.

Among individual stocks, Spectris SXS.L gained 4.3% after the firm agreed to a debt-inclusive 4.7 billion pounds ($6.46 billion) offer from KKR KKR.N over Advent's rival offer.

Bytes Technology BYIT.L slumped 31.5% to the bottom of the midcap index after warning of lower operating profit for the first half of 2026.

British fast food chain Greggs GRG.L fell 15.1% on saying its annual operating profit could dip as a heatwave in the UK discouraged customers from eating out.

Restaurant chain operator SSP Group SSPG.L climbed to the top of the midcap index, rising 7% after filing for Indian IPO of airport lounge operator Travel Food Services.

 For related prices, Reuters users may click on -  UK stock report     .L     FTSE index:         0#.FTS6  techMARK 100 index: .FTT1X         FTSE futures:     0#FFI:  Gilt futures:       0#FLG:         Smallcap index:    .FTSC  FTSE 250 index:     .FTMC          FTSE 350 index:    .FTLC  Market digest:      .AD.L          Top 10 by vol:     .AV.L  Top price gainers:  .NG.L          Top % gainers:     .PG.L  Top price losers:   .NL.L          Top % losers:      .PL.L 
     For related news, click on - UK hot stocks:      HOT and GB     Wall Street:          .N Gilts report:       GB/            Euro bond report GVD/EUR Pan European stock report: .EU Tokyo stocks:       .T             HK stocks:           .HK Sterling report:    GBP/           Dollar report:      USD/
     For company prices, click on - Company directory:  UKEQ          By sector:          FTAX 
     For pan-European market data, click on - European Equities speed guide................ EUR/EQUITY  FTSE Eurotop 300 index........................... .FTEU3  DJ STOXX index................................... .STOXX  Top 10 STOXX sectors........................ .PGL.STOXXS  Top 10 EUROSTOXX sectors................... .PGL.STOXXES  Top 10 Eurotop 300 sectors.................. .PGL.FTEU3S  Top 25 European pct gainers.................... .PG.PEUR  Top 25 European pct losers..................... .PL.PEUR