- FTSE 100 down 80 points to 10,636
- Brent oil hits $98 a barrel
- UK unveils 20% cut in rates for pubs and clubs
- Centrica, BT, 3i, RELX, easyJet, MAB, AJ Bell provide updates
4.12pm: Bank of England preview
Having had lots of BoE previews today, we might as well share some of them.
Overwhelmingly, the view is that the monetary policy committee will hold the base rate at 3.75% at its July meeting.
Thomas Pugh at RSM says: “With the decision itself largely a done deal, the focus will be on the vote split and the guidance.”
There may be a “minority group” preferring to hike to 4%, says Barclays Jack Meaning.
Those hawks will face arguments from doves who “can point to softer headline inflation and cooling wage growth”, says Pugh.
What’s more, says Sanjay Raja at Deutsche Bank, this week’s inflation data showed underlying services CPI is below the MPC forecast, with food inflation a “whopping” 187 basis points below.
“And weaker survey data combined with falling inflation expectations will give the MPC some breathing space to stay on the sidelines.”
Inflation is a moveable beast, with Danni Hewson at AJ Bell saying the fluctuating oil price is “making it difficult for investors and rate setters alike to figure out what’s heading down the tracks when it comes to the UK’s inflationary picture.”
If oil prices remain close to $100 per barrel over the summer, Pugh says a September rate hike “would move firmly onto the table, with another in the winter likely”.He sees the argument at the meeting boiling down to this:
But the “fragile state of economic growth and the tight labour market” are likely to be enough, says Hewson, “to keep inflation on simmer without the Bank needing to take a single step”.
3.51pm: Giving back yesterday’s gains
With just over half an hour to go, the FTSE 100 looks set to give back a bit more than half yesterday’s gains.
We’re seeing a broad sell-off, with many consumer-centric names hit by worries about inflationary effects and rising rate expectations.
Centrica has now plunged 10% after reporting lower first-half profits and a cautious outlook, while elsewhere in the sector SSE and National Grid are down 4.1% and 1.6%.
Precious metals miners Fresnillo and Endeavour Mining are down 5.2% and 3.9% as gold and silver prices sink again.
Rentokil Initial is down 3.5% as investors read across to US rival Rollins after earnings disappointed.
British Airways owner IAG is down 3.2%, perhaps due to read-across from easyJet’s wider losses due to fuel costs and booking trends, though the budget airline is up 4.5%.
Airline group IAG has shed 3.1% as surging crude prices threaten higher fuel costs, while consumer heavyweights including British American Tobacco, Reckitt and Diageo are also lower.
All but 17 of the index constituents are in the red, with Segro, 3i and Anglo American up on the back of company-specific news, while defence, oil and mining sector names are boosted by geopolitical read-across.
3.35pm: ECB predicted to hike
More analysts are saying that a rate hike from the ECB looks likely at its next meeting in September.
The ECB “looks more likely than not” to hike at the September meeting, says Matthew Ryan, strategist at Ebury.
While current data is not screaming for tighter policy, with underlying inflation contained just above target, the latest flare-up in US-Iran tensions and the accompanying jump in energy prices “appears highly likely to force the ECB’s hand”, Ryan says.
“Should the conflict drag on without a path toward de-escalation, the ECB may find itself with little choice but to act pre-emptively in order to safeguard its inflation-fighting credibility.”
The euro dropped following the announcement, down 0.4% against the USD to $1.1370 while the loss against the pound has already reversed, with the euro flat at £0.8538.
“Swaps markets were already largely pricing in a hike at the September meeting, so with the bar for a hawkish surprise high, the absence of a strong commitment to a rate increase at the next meeting was always likely to be met with some downside for the common currency,” Ryan says.
Pierre Roke, market analyst at Validus, points out that markets are now pricing in more than one additional ECB hike by year-end.
“The key question is whether the ECB views higher energy costs as a temporary shock or a more persistent inflationary risk.”
3.10pm: Latest Iran fighting sends petrol prices above 155p
UK petrol prices have risen to an average of 155.6p a litre from 150.6p on 6 July, according to the RAC.
Diesel has jumped to 172.1p from a recent low of 164p as renewed fighting in the Middle East drives oil prices higher.
Brent crude climbed by $4.5 to $98.9 a barrel on Thursday, approaching $100 for the first time in nearly two months.
The RAC’s Simon Williams warned that fuel prices were “shooting up like a rocket”, with petrol heading towards 160p and diesel potentially reaching 180p.
2.53pm: Tesla and Alphabet lead Nasdaq lower
US stocks have extended losses in early deals, with Tesla dropping almost 10% to lead the Nasdaq down 1.6%.
The S&P 500 and Dow Jones are both off 0.9%.
Alphabet is down more than 6%, with other Mag 7 names falling too: Amazon losing 3.5% and Meta falling 3.2%.
Biggest fallers on the S&P is pest controller Rollins, down 12% after its earnings.
Semis are also being sold again, with Microchip Technology, Qualcomm and Texas Instruments among the Nasdaq’s biggest fallers.
Top of the S&P leaderboard is United Rentals after saying it will increase its spending on fleet this year and raising its full-year guidance.
2.22pm: Iran war has entered a more dangerous phase, RBC warns
The Iran conflict has entered a “decidedly more dangerous phase”, with Red Sea oil flows and critical infrastructure increasingly at risk, according to RBC Capital Markets.
Brent crude has topped $99.30 in recent minutes, but commodity strategist Helima Croft says these prices are a “lagging indicator of the extreme pressure building in the region”.
Croft warns that the reported targeting of two Saudi tankers by Yemen’s Houthis could cause a “material reduction” in Red Sea oil shipments and undermine the belief that “the market always finds a workaround”.
Prices could surpass the 2022 peak of $128 a barrel or even reach the 2008 high of $146 in a full regional war, Croft warns.
She says alternative routes for tankers would significantly increase costs and extend journeys to Asia by around four weeks to roughly 54 days.
Iran’s attacks on Kuwaiti desalination facilities are described as “especially concerning”, with Kuwait relying on desalination for 90% of its drinking water.
Some Gulf cities could reportedly have only seven days of clean water if plants were disabled.
2.16pm: Record low US jobless claims
US initial jobless claims have fallen to their lowest level since 1969.
New unemployment claims fall to 187K, down from 209K, while the market forecast was for a small rise to 210K.
“While seasonal factors may be impacting the headline number at the margins, the extremely low level of claims highlights a low layoff rate and the strength underlying the labor market,” says Matthew Martin at Oxford Economics.
“In the wake of moderating jobless claims, continued claims fell a touch further in the week ended July 11, with the four-week moving average creeping lower.
“The decent pace of nonfarm payroll gains amid weak labor-supply conditions should translate into lower continued claims in the weeks ahead.”
1.28pm: ECB in hawkish hold
The European Central Bank has kept interest rates unchanged in its July meeting.
Its main deposit and refinancing rates remain at 2.25% and 2.40% respectively, as expected.
The ECB statement was fairly hawkish, saying the “outlook for energy prices, while highly volatile, currently stands close to the baseline of the June Eurosystem staff projections and well above the levels recorded prior to the conflict in the Middle East”.
“Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out. The Governing Council is therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second-round effects.”
This was a widely anticipated decision, says economist Claus Vistesen at Pantheon Macroeconomics, “ahead of what is now an increasingly anticipated rate hike in September”.
The statement “is a clear signal that the Governing Council is focused on upside inflation risks, implicitly validating market expectations for further tightening”.
He says Christine Lagarde’s press conference will be “dominated by questions about whether the widely expected September rate hike is now effectively a done deal.
“Ms. Lagarde will neither confirm nor deny this, instead pointing to the Q3 staff projections as the key determinant of the Governing Council’s next move.”
He says the latest flare-up in tensions between the US and Iran, and the associated rally in oil prices, give Lagarde “an opportunity to strike a hawkish tone—or, at the very least, to push back against those who argue that the June hike was a mistake”.
1.07pm: Google fined $1bn by EU
Along with last night’s earnings, Alphabet’s Google has been fined €890 million ($1 billion) by the EU for breaching online competition rules through its search and app store services.
Under the Digital Markets Act, the European Commission has imposed a €460 million penalty after finding that Google “gives preferential treatment to its own services, including shopping, hotels, transport and sports results, over those of third parties in Google Search”, alongside €430 million for preventing app developers from directing users to cheaper offers elsewhere.
Google has been ordered to treat rival services fairly and allow developers to promote offers outside its app store. The commission acknowledged that recent changes to search results represented “substantial progress towards compliance”.
The decision could provoke US President Donald Trump, although EU officials insisted the bloc had a “sovereign right” to regulate American technology companies.
12.32pm: Lineker and other millionaires ask Burnham to ‘tax us more’
Former Greggs boss Ian Gregg and podcasting magnate Gary Lineker and almost 120 other wealthy Britons have urged the new prime minister to raise taxes on the richest people, telling him: “We can afford it.”
An open letter organised by the Patriotic Millionaires group backed a 2% tax on wealth above £10 million and argued that the money could be reinvested across the country.
The signatories, who also include filmmaker Richard Curtis, entrepreneurs Hussayn Kassai and Julia Davies, stressed they were not seeking higher taxes on ordinary earned income but on those whose income comes from accumulated wealth.
Chief Secretary to the Treasury Emma Reynolds welcomed the offer but said major tax changes would be announced at the Budget.
Burnham has previously declined to rule out a wealth tax.
12.14pm: US stock futures in red
Wall Street is set to open lower after mixed results from Alphabet and Tesla, while the fresh surge in oil prices revives concerns about inflation and interest rates.
Dow Jones, S&P 500 and Nasdaq futures are all around 0.3% lower.
Alphabet shares are down 4.1% in premarket trading, after it beat revenue and earnings forecasts thanks to cloud revenue surging 82%, but there were concerns around planned capital expenditure.
Tesla is down 6.2% after reporting its first quarter of negative free cash flow in more than two years as operating costs surged.
After their earnings overnight, IBM is down 0.8% while ServiceNow is up 7.2% and Southwest Airlines up 2.2%.
11.50am: Industrial gains ‘likely to be small’ this year
The recovery in the CBI’s headline orders balance is “partly a correction from the erratic-looking fall in June, rather than representing a genuine improvement in activity”, Rob Wood at Pantheon Macroeconomics says he thinks.
Looking ahead, he says he expects “high oil prices and ongoing trade-related uncertainty to weigh on sentiment amongst manufacturers over the coming year, leading to only small gains in the sector.”
On prices, he estimates that the CBI survey is consistent with year-over-year core output producer price inflation easing to around 1.5%, down from the latest reading of 2.5% in June.
“The drop in that balance looks suspicious to us, however, given the recent jump in energy prices, so we would bet on a rebound in price expectations when August’s survey is released.”
The quarterly trends survey suggests that “the hit to business confidence from the war in Iran was short-lived” but points to “activity remaining muted over the course of Q3”.
11.37am: CBI survey
The CBI industrial trends survey has found that output volumes fell in the three months to July, at a slower pace relative to the period to June.
Total orders were unchanged, with a balance of -45 in July, below the consensus forecast of -40. In seasonally-adjusted terms, the balance rose to -47, from -52 in June.
New orders fell through the quarter at the fastest pace in six years, reflecting declines in both domestic and export orders.
Meanwhile, the average selling prices balance dropped to +11, from +22 in June and the lowest since November.
Manufacturers expect output to fall again in the three months to October, and that the total volume of new orders will decline at a brisk pace.
The CBI also put out its quarterly trends survey, where business optimism jumped to -36 in July, from -65 in April, with that optimism leading to a slight strengthening in hiring, with the employment index rising to -14, from -19.
But businesses expect weaker output over the coming three months, with that balance falling to -30 from -20, and the export orders over the coming three months balance dropped sharply to -18 from -3.
Ben Jones, CBI Senior Lead Economist, said: “We’re seeing manufacturers being squeezed from both sides. Costs continue to climb while weak demand limits their ability to raise prices – leaving firms to absorb the pressure through shrinking margins, weaker investment and further cuts to employment.
“If the new administration [he means Andy Burnham’s government] is serious about reindustrialising Britain, restoring industrial competitiveness must be one of its first priorities. Cutting industrial electricity costs – which remain around 45% above the G7 median – would give manufacturers greater confidence to invest, expand and create jobs.”
11.23am: Barclays view on Burnham hospitality rates cut
Barclays sees Andy Burnham’s 20% business rates cut for pubs, clubs and music venues as having a negligible impact on inflation or the public finances, though it should be more significant for individual businesses.
Economist Jack Meaning estimates the £100 million annual saving was equivalent to just 0.2-0.4% of sector revenues. Even if businesses passed on the entire benefit through lower prices, it would reduce headline inflation by only 1-3 basis points.
“In practice, the figure would be even less and build over time,” Meaning said. “It does not therefore change our view on inflation.”
The impact could be more significant for individual businesses, however, he says, with the savings likely to be distributed unevenly and Meaning suggesting the policy “may support employment within the sector”.
At less than 0.01% of GDP, he describes the fiscal cost as “a rounding error” that did not alter Barclays’ view of the public finances.
11.01am: Politicians’ promises
After Andy Burnham has unveiled a 20% rates cut for pubs, clubs and live music venues in England from next April, new Chancellor John Healey has also promised to back companies that have “felt really squeezed”.
Healey said earlier the government was committed to overhauling the wider business rates system, including small business rates relief, at the Budget.
In a speech to business leaders in London, Healey said: “My message to British businesses is quite simple: to British businesses, to British innovators, to British investors: I will back you as your Chancellor, and I’ll back you in financial services, in technology, in retail, in industry, in all parts of the economy.”
He said he is “just as concerned about the cost of business as I am about the cost of living”.
The government also remains under pressure to explain fully how its recent spending and tax pledges will be funded.
In the past two years, this sort of speculation ahead of the Budget has led to a bit of slowdown in the third quarter. Healey and Burnham would presumably have been apprised of this.
10.21am: easyJet numbers show some ‘solid’ elements
EasyJet shares are up arouind 6% this morning, despite a big fall in profits.
“Having fallen sharply yesterday on fears tightened EU ownership rules might nix US bids for the airline, EasyJet recovered some ground despite reporting falling profit today,” says Russ Mould at AJ Bell.
Today’s Q3 numbers have “laid bare the impact of the energy price shock unleashed by the Iran conflict” as jet fuel costs soared, but Mould says this “will have come as little surprise to the market”, which might find some solace from the “solid” customer numbers.
“People are booking later, with demand impacted by the turbulent geopolitical backdrop, but the package holidays business continues to deliver solid growth,” he says.
“The big question now is whether one of its US suitors can get a deal across the line or if red tape gets in the way and EasyJet remains an independent entity.”
Also, on Centrica, where the renewed spike in energy prices has often been seen as good news for the business, but the interim results reveal “a more complicated picture”, Mould says.
“There were lots of moving parts in the numbers. Investment in several areas put pressure on cash flow, while a better commercial performance for its retail-facing British Gas business was balanced out by higher bad debts and spending on its transformation plans.”
Cutting headcount is often a page-one step for bosses looking at the turnaround playbook, he adds, with Centrica planning to cut some 1,300 jobs over the next two years.
“Its ability to do so is apparently bolstered by changes in customer behaviour which mean more customer contact takes place digitally.”
9.44am: Market analysis
Oil prices are up 4.2% this morning now, with Brent crude at $98 a barrel.
The big $100 level is looming now, says market analyst Neil Wilson at Saxo, with no signs of a peace deal and fears rising about choke points for fuel supplies.
He says yesterday’s softer UK inflation print helped the FTSE rally and relieved some pressure on gilt yields, “but oil prices are rising and Andy Burnham is opening the spending taps…so we’re seeing some backing up in yields once more and I expect we test May’s multi-year peaks again”. The 10yr gilt yiled is at 5.076% this morning, the highest since mid-May.
While the ECB today and the Bank of England next week are predicted to leave rates steady, the Fed’s decision next Wednesday is “still live” and “markets are waking up to this fact”, says Wilson.
“It’s not just rising oil prices – AI spend is also surging and keeping upwards pressure on inflation.” (The AI factor is something that Barclays noted last week.)
“We continue to see lots of churn under the hood of the markets with big swings in semis and the like. But the overall picture is pretty well anchored,” he says, with the S&P 500 having “basically stalled” since the middle of May.
In a final epithet before he goes on holiday, Wilson wonders “is SpaceX a meme stock?”
Elon Musk’s rocket company fell further below its IPO price yesterday, down 6.7% yesterday to $115 as the company confirmed it will report earnings on 4 August, triggering the company’s lock-up period, with investors eligible to sell up to 20% of locked-up shares on the first full trading day after the release, which will be 6 August.
“It comes as figures show a third of publicly traded shares are sold short. Which begs the question: When the short squeeze?
“It’s already got a massive retail following, its fundamentals seem somewhat decoupled from its valuation, and now it’s come under heavy short attacks by hedge funds et al…the stars could be aligning.”
9.13am: FTSE outperforming
After just over an hour of trading, the FTSE 100 is almost back to where it finished yesterday, down just five points.
Providing some lift alongside Segro are 3i Group and Anglo American, as well as oil behemoths BP and Shell, up 2.5% and 1.4%.
RELX is up too, on the back of its interim results that included an 11% rise in earnings and a 7% hike in the interim dividend.
These moves are helping the London index outperform other European markets, where the Stoxx 600 is down 0.7% as Milan’s FTSE MIB shed 1.5% and the CAC 40 fell 1%.
The Milan and Paris benchmarks are being dragged down by a 14% fall for STMicroelectronics (NYSE:STM) on weaker Q2 earnings and soft Q3 guidance, disappointing investors after a 35% three-month rally.
Nestlé is another big faller in Europe as profits dropped 31% but organic sales rose 3.6% as part of its volume-led turnaround strategy.
8.54am: 3i and Anglo climb
Shares in 3i Group are up 3.3% after the private equity investment trust reported a 3% total return for the first quarter of its 2027 financial year, driven by continued growth at Dutch discount retailer Action.
Action, by far the largest holding in the portfolio, delivered net sales and operating earnings growth of 14% and 18% respectively.
The discounter, in which 3i owns a 65% stake, paid a €450 million dividend to shareholders in May, of which 3i received £254 million, and closed the period with €718 million of cash.
Anglo American is up 5% after the miner slashed its cost forecasts for its copper business, with unit cost guidance cut to about 145 cents from roughly 172 cents previously.
Cost discipline matters as Anglo repositions itself as a copper pure play and investors are focused on the margin the enlarged group can generate once it merges with Teck.
8.43am: MAB falls despite boost from government’s proposed business-rates cut
Shares in pub company Mitchells & Butlers have dropped almost 5% after it reported flat third-quarter sales, blaming the heatwave for hitting demand at its food-led pubs, which offset stronger trading across drink-focused venues.
Analyst Anna Barnfather at Panmure Liberum notes that profit guidance has been maintained in line with the City consensus, while also noting that business-rates reform from the new Burnham government “could provide upside”.
LFL sales were exactly flat, reducing growth for the year to date to 2.2%, as food sales declined 2.4%, while drink increased 2.6%.
“Separately, the government’s proposed 20% reduction in business-rates bills from April 2027 could provide mid-single-digit upside to M&B’s PBT, based on our previous assessment of the group’s rates exposure,” says Barnfather.
“However, it remains too early to adjust forecasts until the full mechanics, eligibility criteria and interaction with existing relief and transitional arrangements are confirmed.”
8.15am: FTSE 100 drops as Centrica and BT fall
The FTSE 100 has dropped 53 points to 10,664 in initial deals, with Centrica and BT among the early fallers.
There’s a fall of 3.3% for the British Gas owner after it reported an 18% fall in first-half earnings.
Rentokil is down 3.6% after a US rival Rollins reported weaker second-quarter revenue growth than expected.
SSE is down 2.7% as its shares go ex-dividend.
BT has slipped 1.8% after it posted a 4% fall in first-quarter profit.
Top of the leaderboard is Segro after its board said yesterday evening that it “would be minded to recommend” the latest possible offer from Prologis, which values the warehouse owner at up to 1,054.3p per share including its final dividend.
Prologis has until 5pm on 12 August to make a firm offer, with the proposed deal also including a partial cash alternative of up to £3.5 billion and a secondary London listing.
8am: easyJet profits plunge
Budget airline easyJet reported a 70% fall in third-quarter profit as the Middle East conflict pushed up fuel costs and weakened booking demand.
With the board busy fielding takeover offers in recent weeks, the company posted headline profit before tax of £85 million for the three months to June, down from £286 million a year earlier.
Group revenue rose 2% to £2.98 billion, but fuel costs jumped 17% to £732 million.
7.44am: BT profits fall but outlook backed
BT Group has reported a 4% fall in first-quarter profit but has maintained full-year guidance.
The telecoms group posted profit before tax of £505 million for the three months to June, down from £526 million a year ago, as higher financing costs offset lower restructuring expenses.
Chief executive Allison Kirkby called it a “solid start to the year”, with fibre contributing more than half of broadband revenue for the first time.
7.33am: Mixed numbers from Centrica
Centrica has hiked its interim dividend 9% despite lower first-half profits, where energy-market volatility meant progress in parts of the British Gas owner’s business was “slower than we would like”.
Underlying earnings (EBITDA) of £737 million were reported in the six months to June, down 18% compared to a year earlier. Statutory profit before tax swung to £672 million from a £43 million loss.
7.24am: Oil and inflation
“Inflation has remained top of the agenda for markets this morning,” says Henry Allen at Deutsche Bank, due to oil prices hitting their highest levels in almost two months.
“Strikes between the US and Iran show no sign of easing, and the Houthis said they targeted two oil tankers in the Red Sea yesterday, raising fears that the conflict is widening.”
This has raised fresh supply fears as Saudi Arabia has redirected oil exports to the Red Sea port of Yanbu.
There’s still no indication of any emerging peace deal either, Reid says, after President Trump posted yesterday that if Iran shoots at a ship in the Strait of Hormuz, then the US would “bomb and destroy one bridge or power plant” and Iran’s foreign minister posted that aggression against Iran “will compel a powerful and decisive response”, and that those “who contribute to such aggression, whatever the kind of support, will also be considered as legitimate targets”.
The latest rise in energy prices has led to “fresh concerns about a more prolonged stagflationary shock, with investors pricing in more inflation as a result”, says Allen, which saw investors price in a more hawkish path for central banks.
Fed futures are now pricing in a 36% chance of a rate hike next week, and for the ECB investors are now pricing in 48bps of further hikes by year-end, on top of the 25bps seen last month. The ECB’s decision comes later today.
In general, Allen says equities have been “pretty resilient over the last 24 hours”.
“That might seem striking, but we’ve written before how oil prices beneath $100/bbl haven’t been enough to cause a meaningful dent in risk assets. Indeed, if you look earlier in the year, it wasn’t until they got to around $110/bbl that you saw meaningful vulnerabilities for equities and credit.”
FTSE 100 Live: Cautious start expected
The FTSE 100 has been tipped for a cautious start on Thursday, as inflation worries bubble up again over resurgent oil prices and the market digests some major earnings reports.
On the futures market, the London index has been called 16 points lower, following a strong day where it closed up 131 points at just under 10,717.
Brent crude has climbed another 2.2% to above $96 a barrel this morning, its highest level in seven weeks, after another night of US strikes on Iran and reports that Yemen’s Houthis targeted two oil tankers in the Red Sea.
The renewed jump in energy prices has reignited inflation fears, prompting traders to scale back expectations for interest rate cuts, while sending government bond yields higher.
The yield on the US 10-year Treasury hit 4.66%, while the 30-year real yield reached its highest level since the 2008 financial crisis.
Overnight on Wall Street, the Nasdaq and S&P 500 fell 0.6% and 0.1%, while the Dow Jones finished little changed.
However, US stock futures are slightly in the red after mixed results from Big Tech after the closing bell.
Alphabet beat revenue and earnings forecasts, with cloud revenue surging 82%, but its shares fell in after-hours trading after raising planned capital expenditure to as much as $205 billion this year.
Tesla also declined after reporting its first quarter of negative free cash flow in more than two years as operating costs surged.
Back home, new Prime Minister Andy Burnham has unveiled a 20% cut in business rates for pubs, clubs and live music venues in England from next April.
