FTSE 100 Index Steadies; BoE Warns AI Stock Valuations Remain ‘Materially Stretched’

The FTSE 100 held steady on Tuesday, supported by gains in housebuilders and select blue-chip names, even as the Bank of England warned that risks to financial stability have risen in 2025. 

The FTSE 100 has risen around 0.1% so far, with the pan-European Stoxx 600 up 0.2%.

In its latest Financial Stability Report, the Bank cautioned that equity prices, particularly among companies tied to artificial intelligence, remain significantly elevated and vulnerable to a sharp reversal.

Meanwhile, housebuilders led early advances in the blue-chip FTSE 100 index after an upgrade for Persimmon from RBC analysts, which lifted the stock 1.8%. 

The improved sentiment also benefited FTSE 250 peer Taylor Wimpey. 

Other big risers included Rolls-Royce, which gained 1.5%, while Marks & Spencer rose 1.2%.

Among the laggards, Fresnillo slipped 1.4%, with Rightmove down 1.2% and Admiral falling 1%. The declines in some consumer and insurance names offset strength elsewhere in the index.

Banking stocks edged higher following the Bank of England’s decision to ease capital requirements. Regulators also confirmed that all major lenders had successfully passed the 2025 stress test, a move that helped stabilise sentiment around the sector.

In corporate updates, holiday retailer On The Beach reported rising demand despite consumer pressures. 

The company said it expects another strong summer season after annual underlying profits increased 20% to £35 million. Customer numbers also rose, with 1.7 million travellers booking holidays over the year. Shares jumped 14.75% as investors responded positively to the outlook.