- FTSE 100 closes down 40 points
- Babcock impresses with results, first buyback and raised outlook
- FCA proposes review of UK mortgage market to improve growth
4.59pm: FTSE dips
The FTSE 100 fell 0.5%, or 40 points, to close at 8,719 on Wednesday, as investors digested a fresh round of corporate earnings and remained wary amid fragile geopolitical conditions.
Markets had rallied earlier in the week following a ceasefire between Iran and Israel, but sentiment turned cautious as Washington described ongoing talks with Tehran as "promising" but still preliminary.
Babcock International surged almost 11% to lead the blue-chip index after the defence contractor raised its medium-term forecasts, helped by NATO's new commitment to increased defence spending.
On the political front, investors were also eyeing potential risks to Prime Minister Keir Starmer’s welfare reform agenda. A possible rebellion from more than 100 Labour MPs ahead of a key vote on July 1 could deal a blow to the government’s legislative plans and raise concerns over the pound and Starmer’s leadership stability.
4.02pm: FTSE falls in line with other European markets
The FTSE is down 0.4%, with European stock indices all in the red.
WPP is the biggest faller, down 3.1% following its Barclays downgrade.
Budget airline easyJet, chemicals group Croda, tobacco producer Imperial Brands, paper maker Mondi, consumer-focused investment group 3i, and Coca-Cola HBC are next on the losers list.
Providing a bigger drag, oil behemoths BP and Shell are down 0.7% and 1%, even though oil prices have edged up from overnight lows.
Drug giants AstraZeneca and GSK, are both down either side of 1%, while sector peer Hikma is down 2%.
Top of the leaderboard is Babcock, still up 11.5% after its results were warmly received - with some analysts even suggesting the new upgraded outlook might even be conservative. Sector peers BAE and Rolls-Royce are also on the front foot as NATO leaders confirmed their new 5%-of-GDP defence spending target.
Precious metals miners Fresnillo and Endeavour are next, up 2.7% and 1.6%, bisected by retailer JD Sports Fashion, and followed by British Airways owner IAG.
Tech investors Polar Capital Technology and Scottish Mortgage are both up over 1% too, tracking gains on their many Nasdaq-listed portfolio members.
3.21pm: Agentic AI - the biggest buzzword in ad industry
Barclays says the "most (over)-used words in Cannes was agent or agentic AI" after its media team attended dozens of meetings at the ad industry's annual work jamboree in the south of France.
Agentic AI, known to some as AI agents, are systems that operate as digital employees, ie AI that can feedback to itself to see a project through with only minimal human input.
Barclays take is that "question is no longer if we get truly agentic AI but when", putting creative businesses "most at risk" and also offering the potential for a "significant headcount reduction" in agencies' media business to boost margins.
Agencies broadly agree AI can make media 20-25% more effective by reducing waste and improving targeting, with some estimating cuts of up to 80% in creative staff through in-house AI content creation. The "same for less or more for same" is "THE key question for agencies", says Barclays, suggesting it will make sense for clients to reinvest savings given the chance of a better return on investment, with human nature and the prisoner's dilemma both pointing to the 'more for same' budget option, as also happened with the internet and mobile.
AI also shortens campaign times from months to weeks, suggesting agencies will need to move away from their cost-plus revenue model, since less time means less money.
Sam Altman predicted that AI will handle up to 95% of current agency tasks, enabling automated ad creation and optimization, while Meta’s Mark Zuckerberg claim that advertisers "don't need any creative" and will be a "redefinition of the category of advertising".
Baclays is "still in the camp that AI will augment what agencies can do, possibly reduce the headcount but certainly not replace 95% of what they do".
With search queries for Google falling as consumers shift towards AI chatbots like ChatGPT, Barclays reckons if OpenAI started ads tomorrow, "the money would follow the eyeballs", though OpenAI CEO Sam Altman has said he sees ads as a "last resort".
"For the first time in over a decade," reckons Barclays, "there is a real threat to the foundation of Google's business, which naturally has implications for marketers and agencies."
2.58pm: AI agents - enthusiasm giving way to reality
Gartner had a note out on AI agents, which is topical for AIM after the recent float of Sundae Bar Plc (AIM:SBAR).
But if 2025 was hailed as the year of the agent, then within a couple more years, many of them could be on the scrapyard.
According to Gartner, more than 40% of agentic AI projects will be shelved by 2027.
The research firm says early agentic AI enthusiasm is giving way to reality as organisations face soaring costs, ambiguous value, and patchy risk controls.
“Most agentic AI propositions lack significant value or return on investment (ROI), as current models don’t have the maturity and agency to autonomously achieve complex business goals or follow nuanced instructions over time,” said Anushree Verma, senior director analyst at Gartner.
2.45pm: FTSE down, Wall Street mixed
The FTSE is down to around its lowest in almost a month, in line with all the other main European stock indices.
Biggest faller is WPP PLC (LSE:WPP), down 3%, after a Barclays note downgraded the ad giant and rivals after analysts came away from the Cannes Lions ad festival more bearish than before.
Climate activists are also today 'occupying' WPP's HQ to demand it cuts ties to Big Oil.
It's been a mixed open for US markets, with the Nasdaq up 0.5%, the Dow Jones down 0.1% and the S&P 500 rising 0.2%.
1.17pm: AI hitting graduate jobs market?
Graduate jobs this summer will be hard to come by, recruitment platform Indeed has warned, with graduate vacancies down 12% compared to last year as part of the share of all jobs.
Numbers of graduate roles are at their weakest level since at least 2018, the research found, with graduate jobs down 33% in absolute terms.
“Despite the UK labour market holding out overall, new entrants like graduates face a challenging time in securing a first rung on the ladder.
"This signals a wider landscape of employers holding onto existing staff, while some observers contend that entry-level roles in professional occupations are particularly exposed to AI displacement,” said Jack Kennedy, senior economist at Indeed.
Overall, UK job postings are down 5% since the end of March, and 21% below their level before the pandemic in 2020.
This means the UK is an outlier among economies in Europe and the US, as the only country tracked that has not recovered from pre-pandemic levels.
The ratio of unemployed people for each vacancy increased from 1.0 in 2022 to 2.2 as of April 2025.
Retail and hospitality jobs have not seen a huge decline in jobs despite April’s rise in employment costs, Indeed said, with retail postings down 2%, while food service was down 10%, and hospitality and tourism down 11%.
Job postings related to generative AI represented 0.5% of all postings at the end of May.
Kennedy said: "While hiring appetite is weak, job losses have remained modest and the labour market is still somewhat tight by historical standards, supporting gradually easing but still strong wage growth."
12.31pm: Markets mixed
The FTSE 100 is worming its way sideways since dropping back to the ground after a positive start.
On the Continent, the DAX and CAC are both down 0.5% in Frankfurt and Paris.
US stocks are also expected to open broadly flat, with Dow Jones futures down 0.1%, S&P 500 futures flat and the Nasdaq up 0.2%.
"It’s worth remembering that China-US trade issues remain unresolved," says market analyst David Morrison at Trade Nation, after Chinese Premier Li Qiang struck a cautionary tone overnight, urging global leaders not to let trade disputes become overly politicised.
"The remark underlined the fact that while the Israel-Iran hostilities and subsequent ceasefire have pulled the focus somewhat, other sources of tension continue to tick along under the surface, for now."
The mixed US stock index futures comes with investors "mindful that the current ceasefire may break down, although that seems like a small risk for now", says Morrison.
"Of far greater import is a leaked US intelligence report suggesting that the weekend’s US airstrikes on Iranian nuclear facilities didn’t ‘obliterate’ them as claimed by President Trump.
"Instead, this early assessment suggests the damage may only set back Iran’s nuclear ambitions by a few months.
"This would be a serious concern if the report turns out to be genuine and accurate. It opens up a myriad of possibilities when it comes to how to proceed."
The US dollar index has steadied after sinking to around three-year lows yesterday following comments from FOMC members that they could be open to a rate cut at the Fed’s next monetary policy meeting in July.
But Fed chair Jerome Powell has stuck to his cautionary stance, tied to his inflation mandate, despite pressure from President Trump for rate cuts.
Morrison said tariff-related news continues to trickle in. "US ports are reportedly seeing a surge in Chinese freighter traffic ahead of the August 12th tariff deadline with China. This is a sign that companies are preparing for further trade disruptions. Before then, the rest of the world has around two weeks to reach agreements with the US before tariffs on US imports jump to ‘reciprocal’ levels."
11.21am: THG seen as solid
THG's shares are up 17% after a trading update that is described as "solid" by analyst Andrew Wade at Stifel, seeing "marked improvements" in both Beauty and Nutrition arms, and a stronger exit rate.
"The shares have had a weak run, but with momentum building and forecasts stabilised, we see clear upside."
Having absorbed the headwinds of both tariffs and the extended duration of elevated whey prices, THG noted "some recent signs of softening", which Wade says should be supportive of an improving second half margin trend and a "profit split that is likely to be more H2-weighted overall, with tailwinds from Beauty territory pull-back annualisation and softer comps, falling whey prices, the reversal of Beauty own-brand timing, and the building momentum in Nutrition".
Wayne Brown at Liberum says THG shares have been "poor performers" but have seen a 17% "relief bounce" in the past month, with today's update providing "some relief in the keeping guidance unchanged".
All said, he sees "minimal" free cash flow in 2025 and "until we see upgrades and a fundamental shift towards delivering sustainable margins and a level of profits commensurate with a business generating circa £1.8 billion of revenue, then it is hard to move to a 'buy' stance", says Brown, keeping his 'hold' rating in place.
10.52am: FTSE flat
The FTSE 100 is flattish for the second day, with gains for defence groups offset by weakness in financials and some of the bond proxies like utilities and other defensive names such as Imperial Brands and Diageo, notes market analyst Neil Wilson at Saxo.
Government bond yields on both sides of the Atlantic have slipped over the past couple of days, with the two-year US Treasury closing at its lowest level since early May, and following through lower still overnight.
"Fed Chair Powell’s arguably more dovish comments on cutting rates seemed to have prompted the move."
The 10-year Treasury yield benchmark likewise closed at an almost-two-month low, though Wilson says European yields are not genrally following suit though, as Germany said it would raise bond issuance by €19 billion in the third quarter as it’s set for €500 billion stimulus over the next five years.
10.14am: Babcock hailed
Let's have some comments on Babcock after its shares surged on profits that lifted off, improved guidance and a first ever share buyback.
Analyst Chloe Lemarie at Jefferies said the results reflect "its entry into a new era of defense", with medium-term profit margin targets raised to at least 9% from 8% before, with FY26 already guided at 8%, a year ahead of plan which is "5-6% ahead of consensus".
She notes that the buyback was launched with the group almost fully de-levered and the pensions derisking complete, with the £200 million nine-month program around 4% of current market cap.
By division, she said the Nuclear performance "stands out", with sales up 19% compared to 3% consensus forecast, driven by growth across the portfolio, with the Cavendish business up 28% and operating profit up 47%.
Susannah Streeter at Hargreaves Lansdown said Babcock's shares had already been benefiting from the reallocation of budgets and pledges to significantly increase defence funding and pull levers for growth.
"As military tensions ratchet up across the world, as part of a geopolitical risk megacycle, the situation is set to keep prospects for defence stocks solid," she said.
NATO members appear to have committed to spending 5% of GDP on defence and related infrastructure at the current summit in The Hague, which Streeter says "is being seen as a big win for US President Trump who has, for years, berated allies for contributing way less than the US to NATO budgets".
"Brevity is expected in the wording, but such commitments will have long term repercussions. As far as valuations are concerned, much of the spending expectations are already being baked in."
9.40am:
Sales of Tesla Inc (NASDAQ:TSLA) electric vehicles in Europe have continued to recede despite overall growth of the low-emission vehicle market.
New data today shows 8,729 Teslas were bought across the European Union in May, down 40.5% from a year earlier.
Tesla 's EU market share was just 0.9% last month, compared to 1.6% in 2024.
Tesla’s shares have been sliding across Europe through 2026, a decline blamed on CEO Elon Musk’s political activities, the company’s outdated model lineup, and competition from rivals such as China’s BYD.
9.17am: BAE boost from Starmer's F-35 pledge
Britain will purchase at least 12 F-35 stealth fighter jets capable of carrying nuclear warheads, marking its most substantial nuclear capability upgrade in decades.
This represents a boost for BAE Systems PLC (LSE:BA.), which makes a substantial portion of the components, including fuselage, targeting systems and ejector seats.
Prime Minister Sir Keir Starmer is set to announce the move at the NATO summit in The Hague, where he will confirm the jets’ integration into the alliance’s mission that could involve US nuclear weapons.
Earlier this week, the UK agreed to NATO's new target of 5% of GDP spending on defence by 2035.
Defence stocks were expected to weigh on the FTSE with the easing of Middle East tensions, but BAE's are up 0.6% and Babcock's are surging.
8.55am: Another REIT merger
Warehouse REIT PLC (AIM:WHR) has become the latest undervalued mid-cap property trust to agree a bid with a US private equity company before changing its mind and deciding to merge with a London-listed peer.
As Assura did earlier this week, WHR today said it has agreed to combine with Tritax Big Box REIT PLC (LSE:BBOX) in a cash and shares deal, rather than an earlier £470 million cash bid from Blackstone.
Under the terms of the offer, Warehouse REIT shareholders will receive 0.4236 new BBOX shares plus 47.2p in cash for each share held.
On top of that, shareholders will retain the expected quarterly dividends of up to 1.6p per share scheduled for July and October.
8.38am: Mortgage market review
Interest-only mortgages could be reintroduced in the UK as part of a review of mortgage rules by the UK financial watchdog that aims to support home ownership and help boost economic growth.
This morning, the Financial Conduct Authority has launched a consultation to seek public feedback, revealing that several areas are under consideration, including updating responsible lending rules, preparing for increased demand for later-life lending, introducing greater flexibility to improve consumer understanding and innovation, and rebalancing risk appetite in mortgage lending.
In the FCA's mortgage discussion paper, there was a call for views on "whether our rules could better support more interest‑only mortgages".
These once-contentious products, branded a "ticking time bomb" by parliament's Treasury Committee in a review after the global financial crisis, "could be suitable for consumers who may struggle to afford a repayment mortgage and can support sustainable home ownership", the paper said.
Bank shares are lower this morning, with Lloyds and NatWest both down around 0.6%, likely related to other factors though.
8.15am: Babcock helps FTSE shoot higher
The FTSE 100 has started on the front foot again, rising 22 points to 8,781.1 in opening trades.
A big 13% gain for Babcock International PLC (LSE:BAB) is helping lift the index, after the bullish set of final results posted this morning.
Miners and airlines are also near the top of the leaderboard, including Glencore PLC (LSE:GLEN) and International Consolidated Airlines Group SA (LSE:IAG).
7.59am: THG returns to revenue growth
THG PLC (LSE:THG), owner of MyProtein, Lookfantastic and City AM, has reported improved trading in the second quarter of fiscal 2025.
The group said in a statement ahead of its AGM that it returned to positive revenue growth across its Beauty and Nutrition divisions on a constant currency basis, and confirmed its full-year guidance remains unchanged.
THG Beauty is expected to report a revenue decline of 2-3% in the second quarter, an improvement from a 9.8% decline in the first.
In Nutrition, revenue is expected to grow 5-7% in Q2, accelerating from 0.1% in Q1 and marking the fastest pace since early 2022 as its offline strategy made progress, with Myprotein products now available in over 34,000 retail site globally, including key listings in Europe, Asia, and the US.
THG said that while prices for milk and whey remain elevated, there are signs of softening, particularly in high protein concentrations.
7.42am: Babcock profits and shareholder returns surge, upgrades guidance
Babcock International PLC (LSE:BAB) reported a 51% increase in profit, a 30% rise in its full-year dividend, proposed its first ever share buyback and upgraded its medium-term guidance as it heralded a "new era" for the defence sector.
Statutory operating profit came in at £364 million for the contractor's financial year to 31 March on revenue that rose 11% organically to £4.83 billion, supported by growth in the Nuclear and Marine divisions.
Underlying operating profit rose 53% to £363 million, or 17% excluding prior-year non-recurring items, while the contract backlog stood at £10.4 billion.
A £200 million buyback will be launched soon, while the total dividend was increased to 6.5p per share from 5p a year ago.
Chief executive David Lockwood said: “This is a new era for defence. There is increasing recognition of the need to invest in defence capability and energy security, both to safeguard populations and to drive economic growth."
7.21am: Markets OK with current 'tenuous ceasefire'
Despite the ceasefire between Israel and Iran appearing "somewhat tenuous", the markets are "shrugging it off, with energy prices extending their descent overnight, says market analyst Kyle Rodda at Capital.com.
This saw lower Treasury yields and helped US stocks push higher.
"Realistically, the markets don't care if a limited conflict comprised of mostly air strikes continues between the two countries.
"It's the prospect of a broader war, with deeper US intervention and an Iranian blockade of the Strait of Hormuz that really matters.
"And for now, the risks of that seem low. As a result, the war trade is being entirely unwound, with the relief rally helping US tech stocks push the NASDAQ towards record highs," Rodda says.
Comments by US Federal Reserve chair Jerome Powell in his testimony before Congress about the path forward for monetary policy also "boosted market sentiment at the margins", he adds.
PCE inflation data published at the end of the week "will be crucial in determining the impact of tariffs on inflation and the timing of the next Fed cut".
Currently, markets are ascribing a July cut as a 20% chance, with two priced in before year-end.
7.11am: FTSE 100 called higher
The FTSE 100 is predicted to open higher on Wednesday, following a mixed performance the previous session and strong gains on Wall Street overnight.
A gain of seven points was indicated on the futures market for the London blue-chip index, which finished just short of one point higher at 8,758.99 the previous day.
Overnight, the tech-heavy Nasdaq led the gains, up 1.4%, with the S&P 500 rising 1.1% and the Dow Jones 1.2%.
Asian markets are all in green this morning, led by the 0.9% for Hong Kong's Hang Seng, and 0.7% for the Sensex in Mumbai.
6am: What to watch on Wednesday 25 June
Babcock International PLC (LSE:BAB) shares are at a 10-year high, but there is potential for these final results, the first since the defence group's return to the FTSE 100 earlier this year, to provide new catalysts.
Analysts at JP Morgan expect the defence contractor to raise guidance and outline growth opportunities following the UK’s recent Strategic Defence Review (SDR).
There is also the potential for a sizeable dividend hike.
Announcements expected:
Interims: Velocity Composites
Finals: Babcock International, Berkeley Group Holdings, Duke Capital, Liontrust Asset Management, Marks Electrical Group, ProCook Group, Sequoia Economic Infrastructure
Economic announcements: MBA Mortgage Applications (US), New Homes Sales (US),Crude Oil Inventories (US)