The FTSE 100 closed down sharply on Friday, although well above early lows, as investors weighed Thursday’s hefty falls on Wall Street sparked by fears surrounding US regional banks.

The FTSE 100 index closed down 81.52 points, 0.9%, at 9,354.57. It had earlier traded as low as 9,276.91.

The FTSE 250 ended 208.40 points lower, 1.0%, at 21,782.96 while the AIM All-Share shed 17.24 points, 2.2%, to 772.65.

For the week, the FTSE 100 was down 0.8%, the FTSE 250 was 0.1% lower, and the AIM-All Share declined 1.7%.

Wall Street took a tumble on Thursday and shares of regional banks took a hit after Zions Bancorp and Western Alliance said they had been victims of fraud on loans to funds that invest in distressed commercial mortgages.

Zions Bancorp said it would take a 50 million-dollar (£37 million) charge related to a loan issued by its California Bank & Trust division, while Western Alliance said it had begun legal proceedings over a bad loan.

“While everyone has been watching the tech sector for signs of a bubble, it’s the banking sector that’s the root cause of a minor market sell-off today,” said Russ Mould, investment director at AJ Bell.

Mr Mould noted “pockets” of the US banking sector including regional banks have given the market cause for concern.

“This includes Zions flagging an unexpected loss on two loans and Western Alliance alleging a borrower had committed fraud,” he added.

But he said the pullback in UK-listed banks will be “sentiment-driven”.

“Investors have been spooked and moved to trim positions in the sector, possibly opting to have lower exposure in case a crisis is brewing. There is no evidence of any issues with the London-listed core banking names, but investors often have a knee-jerk reaction when problems appear anywhere in the sector,” he added.

Barclays shed 5.7%, while Standard Chartered fell 3.5% and HSBC 2.5%. Lloyds Banking Group and NatWest ended down 2.4% and 2.9% respectively.

ICG, which has exposure private credit and asset backed finance fell 5.5%.

Stocks in New York were lower at the time of the London close. The Dow Jones Industrial Average was down 0.1%, the S&P 500 was 0.3% lower, while the Nasdaq Composite declined 0.6%.

Shares in Zions rallied 2.5% while Western Alliance firmed 0.9% at the time of the London equity market close, although both were well below opening highs.

Gold miners were also prominent fallers in London as the price of the yellow metal retreated from record highs.

Gold traded at 4,242.28 dollars an ounce on Friday, down from 4,270.73 dollars on Thursday.

The latest volatility saw Fresnillo fall 11% and Endeavour Mining drop 5.5%.

The pound was quoted lower at 1.3398 dollars at the time of the London equity market close on Friday, compared with 1.3429 dollars on Thursday.

The euro stood at 1.1664 dollars, lower compared with 1.1671 dollars. Against the yen, the dollar was trading at 150.31 yen, lower compared with 150.83 yen.

The yield on the US 10-year Treasury was quoted at 4.00%, trimmed from 4.03% on Thursday. The yield on the US 30-year Treasury stood at 4.60%, narrowed from 4.62% on Thursday.

In European equities on Friday, the CAC 40 in Paris closed ended 0.2% lower, while the DAX 40 in Frankfurt slid 1.7%.

Bucking the weaker trend in London, Pearson rose 2.3% as it said it remains on track to meet 2025 market expectations after reporting a pick-up in sales growth during the third quarter, driven by growth of its Virtual Learning segment.

The London-based educational materials publisher said underlying group sales rose 4% year-on-year in the third quarter, taking growth for the first nine months of 2025 to 2%. Pearson said it expects stronger sales growth in the fourth quarter due to “known business unit dynamics”.

Chief executive Omar Abbosh said Pearson is “well positioned for the opportunities that lie ahead”.

Smiths Group climbed 1.7% after announcing the sale of Smiths Interconnect to Molex Electronic Technologies Holdings, part of Wichita, Kansas-based Koch Industries, at an enterprise value of £1.3 billion.

The London-based engineering group said the sale price for its electronic connectors business represents 15.1 times headline earnings before interest, tax, depreciation and amortisation of £86.1 million for financial year 2025, which ended July 31.

Analysts at Jefferies said it is a “good price” and “marks a significant milestone in the group’s strategy of unlocking value across its portfolio of businesses”.

Despite Friday’s falls, Morgan Stanley said it is positive on UK equities from a European equity strategy perspective.

“Our call is less about UK macro, and more UK equities’ rising level of attractive, bottom-up drivers, growing interest from investors from relatively low levels this year, and the added benefit of the market’s low beta,” the bank said.

Morgan Stanley said investor interest in the UK is on the rise from relatively low levels, while even some of the “more challenged” portions of the UK equities market (discretionary, rate sensitive) are beginning to face relief as expectations start to pick-up that the November 26 budget will be “less bad than feared” for equities and rates markets.

“UK equities are low beta, underowned, and awash with idiosyncratic drivers,” the broker added.

Brent oil traded at 60.03 dollars a barrel, down from 61.70 dollars late on Thursday.

The biggest risers on the FTSE 100 were Pearson, up 25.5 pence at 1,119.5p, Haleon, up 6.7p at 351.8p, Reckitt Benckiser, up 106.0p at 5,910.0p, Coca-Cola HBC, up 62.0p at 3,556.0p and Smiths Group, up 40.0p at 2,406.0p.

The biggest fallers on the FTSE 100 were Fresnillo, down 276.0p at 2,352.0p, Barclays, down 21.45p at 357.8p, ICG, down 113.0p at 1,929.0p, Endeavour Mining, down 194.0p at 3,356.0p, and Antofagasta, down 124.0p at 2,663.0p.

Monday’s global economic diary sees retail sales and industrial production in China.

Later in the week inflation reports are due in the US, UK, Japan and Canada.

Next week’s UK corporate calendar sees third quarter results from lenders Barclays, Lloyds Banking Group and NatWest plus consumer goods groups Unilever and Reckitt Benckiser.

Contributed by Alliance News.

Muhurat Trading: As Diwali 2025 approaches, the BSE and NSE will remain closed on Tuesday, October 21, for Lakshmi Puja. The only market activity on October 21 will be the one-hour Muhurat Trading session, a traditional ritual marking the start of the Hindu financial year. This year, the session will run from 1:45 PM to 2:45 PM.Though many households will celebrate Lakshmi Puja on the evening of October 20, the stock exchanges will officially observe the holiday the next day. Markets will also remain closed on Wednesday (October 22) for Balipratipada, Dhanteras (October 18) and the weekend (October 19).

What is Muhurat Trading?

Muhurat Trading, literally meaning “auspicious hour,” is a symbolic trading session held annually during Diwali. It is considered a favourable time to begin new investments or business ventures, reflecting optimism and faith in prosperity. It is a special one-hour session on the stock market, during which trading is permitted across equities, futures and options, currency and commodity derivatives, and securities lending and borrowing (SLB). This year, unlike recent years, the session will take place in the afternoon rather than the evening, with trade modifications allowed until 2:55 PM.

What is the significance of Muhurat Trading?

The session marks the start of Hindu New Year (Samvat 2082), symbolising renewal, prosperity, and good fortune for investors. Historically, the session has been positive for markets: in 14 of the last 18 Muhurat Trading sessions, the BSESensex closed higher. Even during turbulent periods, such as the 2008 financial crisis, the Sensex rose 5.86% during Muhurat Trading, ET reported.Experts note that while the session is short and often volatile due to thin trading volumes, it is more symbolic than profit-driven. However, investors typically view the session scheduled on October 21, 2025, from 1:45 PM to 2:45 PM, as both a cultural and financial ritual, with many believing that investments made during this auspicious hour can bring prosperity and good fortune for the year ahead.