UK shares mixed as investors assess fiscal worries, rate cut path

July 4(Reuters) - London's main stock indexes closed mixed on Friday, with investors assessing domestic fiscal worries and the rate cut path, while weak global investor sentiment persisted ahead of a U.S. tariff deadline.

The blue-chip FTSE 100 .FTSE was unchanged on the day but notched up a second weekly gain, while the domestically-focussed FTSE 250 .FTMC lost 0.7% on Friday and ended the week lower.

The midcap index had logging its largest quarterly gain in more than four years by the close of trade on Monday, but then came under pressure as U-turns on welfare reforms blew a hole in Finance Minister Rachel Reeves' budget plans.

The reform bill passed on Tuesday, but with limited cost-reduction measures from the initially expected 5 billion pounds ($6.83 billion) in savings, leading to concerns of raised taxes or spending cuts elsewhere.

S&P Global said the inability to make modest cuts to welfare spending showed the government's "limited budgetary room for manoeuvre".

Homebuilder stocks .FTNMX402020 led sectoral losses on Friday, dropping 2.1% after MJ Gleeson GLEG.L warned of profit being at the lower end of market expectations for fiscal 2026 due to subdued demand.

The group slumped 6.7% and was the top decliner on the smallcap index.

Larger peers Vistry VTYV.L, Persimmon PSN.L and Taylor Wimpey TW.L fell 2.8%, 1.3% and 1.6%, respectively.

Industrial metal stocks .FTNMX551020 fell, tracking lower metal prices. Anglo American AAL.L, Antofagasta ANTO.L and Glencore GLEN.L slipped more than 1% each. Atalya ATYM.L lost 3%.

The Bank of England's Alan Taylor said on Friday that cutting interest rates now would be better than waiting and risking cutting them later in a hurry. Traders are currently pricing in an 80% chance of a rate cut in August, according to LSEG data.

Data from S&P's UK construction PMI showed Britain's construction industry downturn reduced in June with homebuilding growth, but commercial building tumbled due to economic worries.

Elsewhere, global markets were subdued after U.S. President Donald Trump said Washington will start sending letters with tariff rates to countries on Friday.

Britain remains one of the only countries to have got a deal with the U.S.

Among individual stocks, greeting card and gifting retailer Moonpig MOONM.L fell 8.7% to the bottom of the midcap index after a rating downgrade by Deutsche Bank.

($1 = 0.7323 pounds)

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