- FTSE 100 falls 7 points to 9,181
- BAE and Babcock climb on Norway warship win
- Gold and silver prices rise to lift sector shares
4.11pm: FTSE flat, bond markets keep eye on Downing Street changes
The FTSE 100 is twisting around the flat-line as trading turns into Monday's final stretch.
Defence stocks rose in London, helped by a deal to sell warships to Norway, and around Europe, following weekend comments from EU Commission President Ursula von der Leyen about "pretty precise plans" for military deployments to Ukraine.
Down on the FTSE 250, while in positive territory, it's not going anywhere particularly impressive, up 17 points.
In the background, UK Prime Minister Keir Starmer has returned to the office after the summer recess and with a round of hiring and firing to beef up his economics team.
Treasury secretary Darren Jones, essentially Rachel Reeves’s former number two, has been poached by Number 10, with Baroness Minouche Shafik, former Bank of England deputy governor, hired as an economic advisor.
Market analyst Kathleen Brooks at XTB says the moves come amidst "a sense of urgency that the PM needs to address the country’s economic woes and the upcoming budget", where the simple story is that tax rises or spending cuts are needed but neither are wanted, as ever.
Shafik, once the preferred choice to replace Mark Carney as BoE Governor in 2019, is not thought to want a "hard-left budget", says Brooks, "which is why the bond market has been relatively stable on Monday".
Bond yields spiked earlier in the morning but quietened down later, in line with moves in Europe.
"Some see Number 10’s decision to boost its economic know-how as a way to undermine the Chancellor," whose deep unpopularity with the electorate was shown in a new YouGov survey today.
But when Rachel Reeves was caught on TV crying during PM questions in July, rumours that she was about to be sacked, saw the bond market apparently spooked about a more left-leaning chancellor and sending bond yields truly surging.
But with the UK government bonds the worst performing in Europe in the past four weeks, Brooks says, "either the market has changed its view on Rachel Reeves and sees her as a liability for the UK’s finances, or the market does not believe that today’s appointments will lead to a new chancellor moving into number 11".
3.54pm: Bank tax could weigh on sector, but 'unlikely', say analysts
Remember last week, when shares in Lloyds, NatWest and Barclays took a knock after the IPPR thinktank proposed a "tax raid" in the upcoming Autumn Statement, with an FT article with City insiders slamming the idea.
Analysts suggest the market may be overreacting.
Citi analysts say neither the FT article nor the IPPR proposals add anything new, with similar ideas having been circulating for years, including the Reform Party’s election manifesto recently too.
Policies like this could backfire, says Citi, while Deutsche Bank broadly agrees, but warned that talk of an "excess reserve levy" could weigh on sentiment on the sector in the run-up to the Budget in late October.
In the worst-case scenario, a bank levy could shave as much as 20% off sector earnings, with NatWest the most exposed, though this is an extreme case and "unlikely in our view", citing several potential hurdles.
3.27pm: Kainos shows good momentum
On the FTSE 250, shares in Kainos Group PLC (LSE:KNOS) have surged over 22% today, following an update from the IT services group where it lifted its revenue outlook but said profits were likely to be in line with market forecasts.
Revenues are likely to come in at the top end of forecasts, driven by a stronger-than-expected first half, said the company, which is a major partner to Workday, the provider of enterprise resource planning software for financial management and HR.
Sales momentum had picked up across all three of its divisions, said Kainos, highlighting a robust backlog and healthy pipeline, and long-term structural drivers including the emerging opportunities from wider AI adoption.
Analyst Martin O'Sullivan at Shore Capital says a positive reaction in the stock today would be expected "given its recent underperformance over the past three months".
"The business is navigating a challenging macro environment with encouraging signs of momentum".
3.05pm: Tesla sales slump again
Tesla sales continued to slump in key European markets, even while overall car sales in these markets, including EVs, held steady or grew.
Registrations for Elon Musk's electric vehicle maker in Sweden tumbled 84% in August, fell 47% in France and dropped 42% in Denmark.
In Norway, Tesla sales increased 21% but this compared to Chinese rival BYD enjoying 218% growth.
The previous month, Tesla sales dropped 40% across Europe, the UK and Scandinavia.
Shares in BYD fell today, however, as the company’s latest financial results after the close on Friday showed a decline in quarterly profit amidst a local price war.
BYD is targeting 5.5 million vehicle sales in 2025 but by the end of July had sold only 45% of this target.
2.36pm: FTSE in the red
The FTSE 100 has dropped into the red.
There's not obvious changes, though Shell and BAT in the index's top 10 heavyweights are have sunk a little lower. AstraZeneca, GSK and BP are flat too.
2.25pm: Royal Mail makes profit as automation increases
Royal Mail made its first profit in three years last year, says parent company International Distribution Services.
In the year to March, just before the £3.6 billion takeover of IDS by Czech billionaire Daniel Kretinsky, an adjusted operating profit of £12 million was made - though only if voluntary redundancy costs are excluded.
Higher parcel volumes were key, said IDS, as well as higher levels of automation (presumably linked to those redundancies). Parcel automation was 90%, up from 50% in 2022, as warehouses in Daventry and Warrington are now able to process up to 1.5 million parcels a day.
Overseas parcel delivery business GLS made an adjusted operating profit of £286 million, though this was down 10%.
1.19pm: Uranium signal glowing
For a metal that doesn’t often grab headlines, a bull market is quietly building, reckons Citi.
The US bank sees the conditions in place for a sustained uranium rally, forecasting prices will hit $100 per lb by 2026.
The last time we were at those levels was the mid-2000s, but this time, the drivers are different, Citi argues, and less widely appreciated by the market.
In short: supply remains tight, thanks to years of underinvestment in mining for the metal, and demand is strengthening.
“Demand from China, small modular reactors, and enrichers is underappreciated,” the analysts write, having been banging on the uranium drum for the last few years (this 2023 buy call was when the price was $50/lb compared to over $76 today).
12.30pm: FTSE flattens off
The FTSE 100 lurched lower as midday came around, which is the time when US traders often normally start to come online.
So maybe there are some who've logged on despite the public holiday across North America.
London's blue-chip leaderboard is still topped by Endeavour Mining, up 3.8%, followed by the defence and aerospace trio of Babcock International, up 3.6%, Rolls and BAE Systems, both up over 2%.
Tesco, Fresnillo and Barclays are next.
On the downside, utilities are still the main presence in the red, with 3i Group also a notable faller.
It's been a mixed day so far for markets, says analyst David Morrison at Trade Nation, with Hong Kong’s Hang Seng jumping over 2%, led by a 19% surge in Alibaba’s stock, and on renewed confidence in China’s homegrown AI abilities.
Economic data out of China has "helped shape sentiment", he says, while relations between India and China were also in focus at the Shanghai Cooperation Organisation summit, where leaders from both countries emphasised they are "development partners, not rivals".
Chinese President Xi Jinping urged SCO members to strengthen AI cooperation while rejecting what he termed a “Cold War mentality.”
India's rupee fell to an all-time low against the US dollar.
Morrison highlighted that cryptocurrency markets continued their retreat. Bitcoin pulled back towards $107,000 this morning, extending recent losses.
For Europe, it's going to be a quiet session, given that US markets are closed, with France's CAC flat, but Germany's DAC up 0.4%.
Shares in Novo Nordisk have jumped 3% after trial data showed its blockbuster weight-loss drug Wegovy outperformed Eli Lilly’s rival products in reducing cardiovascular risks.
Patients using Novo’s semaglutide had up to a 57% greater reduction in heart attack, stroke or death risk compared to those using tirzepatide-based drugs like Zepbound and Mounjaro.
11.53am: Data suggests consumers and businesses fairly confident
The Bank of England's money and credit data - showing healthy credit flows, rising mortgage approvals and steady asset accumulation "all suggest that the consumer remains financially healthy and sufficiently confident to keep spending," says economist Elliott Jordan-Doak at Pantheon Macroeconomics.
"Easing policy uncertainty and falling borrowing costs are also supporting corporate borrowing."
While this flies against reports in some corners of the media, Jordan-Doak says it suggests healthy GDP growth in the second half of the year.
Consumer credit flows rose £1.6 billion in July compared to June, following a £1.5 billion rise that month and an average of £1.4 billion since the start of the year, suggesting only a limited hit to financial decision-making despite the barrage of headwinds in H1, he says.
Adjusted for inflation, household savings fell by 0.1% on a seasonally adjusted month-to-month basis, pointing to "few worries about rising inflation or tax-hikes in the upcoming budget".
Corporate credit flows also grew solidly, with total bank lending to businesses up 5.5% year-on-year in July, up from a 4.5% gain in June and the joint-highest since February 2021.
"The bulk of lending continues to flow to large businesses, with lending to bigger businesses growing by 8% year-over-year, while lending to SMEs grew by just 0.9%.
"Still, lending to SME’s fell in year-over-year terms for 45 months in a row until June of this year, so the 0.9% growth in lending in July looks strong in that context.
"We think that falling borrowing costs and easing policy uncertainty should continue to support borrowing by businesses in the coming months," says the economist.
On the housing market, he thinks the data "points to healthy fundamental demand, which we expect to drive gains in house prices over the course of H2".
11.11am: Gilt-y feelings?
UK government bond movements have been flagged by Enrique Diaz-Alvarez, chief economist at Ebury, who says long-dated gilt yields are continuing to rise "relentlessly".
This is "a general trend" in government bond markets, he says, though Britain's gilt yields remain the highest in the G10.
"Labour's inability to control spending amid persistent unpleasant surprises in the inflation numbers certainly do not help.
"Markets are currently pricing in less than a 50% chance of even a single rate cut this year from the Bank of England, but the steady rise in medium and long term rates threaten to render policy moves less effective regardless.
"The focus in the UK this week will likely be on Friday’s retail sales figures for July, which are expected to show that consumer spending stalled at the start of the third quarter of the year."
10.34am: Docklands lido and McLaren F1 team deal
A couple of stories sports-related stories.
First, the owners of Canary Wharf are planning to build an Olympic-sized lido in what is being reported as an attempt to make the offices in the area more popular.
Canary Wharf Group, which is owned by Canada's Brookfield and the Qatar Investment Authority, submitted a planning application for a floating, natural water pool with six lanes, accompanied by saunas, a clubhouse and a restaurant, the Telegraph is reporting.
The Canary Wharf area has suffered from a rise in the number of people working from home post-Covid, the paper says, prompting thoughts about how to entice workers back.
Elsewhere, Sky News reports that McLaren Formula One has been valued at more than £3 billion as the team is fully taken over by its majority owners, Bahrain's Mumtalakat sovereign wealth fund and Abu Dhabi-based automotive investment group CYVN Holdings.
The pair have agreed to buy out the 30% stake in McLaren Racing that they do not already own.
The team was rescued in the 2020 pandemic by Mumtalakat, CYVN, in a deal led by New York-based MSP Sports Capital that gave the business a valuation of £560 million at the time.
10.07am: Rolls keeps on rolling
Rolls-Royce Holdings PLC (LSE:RR.) is up 2%, not just from its connection as a supplier to BAE's frigates deal.
A Financial Times report at the weekend said the engine maker is looking at funding options for its Small Modular Reactor nuclear business, including a potential IPO.
Rolls has denied the story.
Back in June, Rolls-Royce SMR was chosen as the UK government's preferred bidder to develop the UK’s first small modular nuclear reactors.
"It’s fair to say that investor appetite to back a spin-off vehicle from Rolls-Royce could be huge," says market analyst Russ Mould at AJ Bell.
"Many corporate turnarounds deliver a short-lived share price boost for investors, stalling as reality hits home that it’s not simply about fixing the engine, it’s about making it go faster and harder.
"Rolls-Royce is a rare example of a company that’s done both – getting its house in order and subsequently grabbing opportunities aplenty. That’s why its shares have continued to move higher.”
9.57am: Lending, saving and borrowing data
Net new mortgage approvals for house purchase rose to 65.4K in July, according to data from the Bank of England, up from 64.6K in June (revised up from 64.2k), and above the consensus forecast of 64.0K.
UK household deposits with banks and building societies, as well as cash stored in NS&I accounts increased by £7.2 billion in July, down from £8.9 billion in June.
The net flow of consumer credit was £1.6 billion in July, up from £1.5 billion in June (revised from £1.4 billion) and above the consensus estimate of £1.3 billion.
9.44am: UK manufacturing PMIs
UK manufacturing PMI dropped to 47.0 for August, below the forecast of 47.3 and down from July's six-month high of 48.0, but below the neutral 50.0 mark for the eleventh month in a row.
"Production volumes are still showing resilience in the face of global geopolitical uncertainty and US tariff policies, with both July and August having seen only slight contractions that were milder than those suffered earlier in the year," says Rob Dobson, director at S&P Global Market Intelligence.
Business confidence lifted to a six-month high, which he says reflects "hopes that the trading environment is starting to settle down".
But there was a steep drop in UK manufacturers' new orders, with order books and overseas demand both falling at "some of the fastest rates seen over the past two years", Dobson says.
"Weak market conditions, US tariffs and downbeat client confidence all contributed to the dearth of new contract wins."
There was a tenth successive month of job cuts.
"The outlook for the sector therefore clearly remains very uncertain.
"With manufacturers fearing that possible government policy decisions, including potential tax increases, could further hurt their competitiveness in domestic and export markets, the upcoming Budget will likely prove very important in guiding business confidence about the year ahead."
9.28am: September the cruellest month
September is the cruellest month, says market analyst Neil Wilson at Saxo, for Wall Street stocks at least.
Historically, this has been the worst-performing month for the S&P 500, Dow Jones and the Nasdaq.
The decline at the end of last week was "perhaps as a foretaste of seasonal volatility", he says, with the Nasdaq down more than 1% for the session as Nvidia extended its recent weakness in the wake of earnings.
This Hong Kong rallied 2% on a huge 18.5% surge in Alibaba shares, which jumped on Friday in New York when earnings showed strong AI revenue growth.
Alibaba is also developing a new AI chip – viewed as a negative development for Nvidia.
The S&P 500 still notched its fourth winning month in a row in August, including a series of record highs before ending on a bum note – which Wilson says "may have been a case of investors taking some chips off the table ahead of a long weekend in the US for the Labor Day holiday".
He says the US court ruling on tariffs being illegal "could be good news in the long run but that is only going to increase uncertainty for businesses in the near term".
"Multi-year investment decisions around supply chains and so on will be delayed. We don’t need to get into the weeds with the details of the US court ruling – sectoral tariffs are ok, but sweeping reciprocal tariffs are not.
"It will go quickly to the Supreme Court, which it should be noted has a lot of Trump appointees."
8.39am: Utilities fall as gilt yields rise
Holding the Footsie back are falls for utilities, including BT Group, National Grid, SSE, United Utilities and Severn Trent.
Life insurers and other financials are also in the red, including Standard Chartered, Aviva, ICG and Schroders.
Gilts are on the rise this morning, with the 10-year UK government bond hitting 4.76% and the 30yr rising to 5.64%, the highest since 1998.
"September kicks off on a cautious note," says analyst Matt Britzman at Hargreaves Lansdown, explaining that the London benchmark has opened broadly flat "as traders weigh a quiet calendar and thin volumes amid the US Labor Day holiday".
He says housebuilders could be in focus after the soft Nationwide data "hinted at affordability strains".
"With few domestic catalysts, attention turns to central bank signals later this week to set the tone for the month ahead."
He says gold is up due to the fresh uncertainty about trade coming from the federal court ruling calling Trump’s global tariffs illegal, setting up a Supreme Court showdown.
"That backdrop, coupled with rising bets on a Fed rate cut later this month, has gold glistening near record highs as investors seek safety. All eyes now turn to this week’s labour data, which could shape the size of the Fed’s next move."
8.15am: Gold miners and BAE lead Footsie higher
The FTSE 100 managed to release the handbrake, starting the new month with a gain of 29 points to 9,216 to reverse the losses from the end of last week.
Precious metals miners Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) and Fresnillo PLC (LSE:FRES) are leading the way, both up over 2.6% as gold and silver prices start the week on the front foot.
Gold is up 0.8% to $3,476 an ounce, while silver is up 2.1% to above $40 an ounce.
Next, BAE Systems PLC (LSE:BA.) is up 2.5% after Norway agreed a £10 billion deal for anti-submarine warships.
Rolls-Royce Holdings PLC (LSE:RR.) and Babcock International PLC (LSE:BAB), which both contribute to the Type 26 frigates, are also rising over 2% on the news.
7.56am: CMA probes Bakkavor-Greencore merger
The Competition and Markets Authority has announced that it is investigating the agreed acquisition of Bakkavor Group by rival Greencore Group.
It was way back in April when the FTSE 250 companies announced they had struck the deal, designed to create a £4 billion convenience food group.
The CMA invited comment on the deal in July and seemingly on the basis of what it has received, is now carrying out a 'phase one' probe, which has a deadline of 27 October.
It will then either allow the deal, perhaps with remedies proposed that must be made in order to allow the deal, or go into a deeper 'phase two' investigation.
7.28am: House price data mixed
House prices fell 0.1% month-on-month in August, according to monthly data logged by Nationwide Building Society.
The house price index dropped back on a seasonally adjusted basis when it was expected to inch up 0.1% after rising 0.5% in July.
Compared to a year ago, the index was up 2.1%, following a 2.4% rise in July.
"The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms," says Nationwide's chief economist, Robert Gardner.
"House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
"Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many."
He said affordability "should continue to improve gradually" if income growth continues to outpace house price growth, though the path for borrowing costs depends on the Bank of England.
7.15am: FTSE 100 set for tentative start
The FTSE 100 will start September trading with the handbrake on, with US markets closed for the 'Labor Day' holiday but manufacturing PMI data out later.
Futures markets are predicting a flat start for the London index, which last closed at 9,187.34, finishing last week down more than 29 points on Friday, losing just under 122 points over the week.
This meant that over the whole month of August, the Footsie gained around 119 points, climbing 1.3% and setting a number of record highs, but finishing with a whimper.
US stocks also finished lower at the end of last week. The pull-back overnight came amidst "signs of exhaustion going into a seasonally weak month of September", said market analyst Kyle Rodda at Capital.com.
"The sell-off was led by tech stocks as questions persist about valuations and heavy concentration.
"Unlike recent market dynamics, the drop in tech stocks wasn’t offset by a rotation into cyclicals. The moves could be a symptom of end of month flows."
Last week also ended with a US federal appeals court upholding earlier rulings that questioned the legality of Donald Trump's tariffs.
Asian markets are mixed this morning, with Japan's Nikkei down 1.3% but the Hang Seng up almost 2% and India’s Nifty 50 rebounding 0.5%.
This followed the meeting between China's President Xi Jinping and India's PM Narendra Modi at a weekend summit in Shanghai alongside leaders from Russia, Iran and Turkey.
"The meeting focused on strengthening ties among emerging markets in the face of what participants described as aggressive US trade policies," says analyst Ipek Ozkardeskaya at Swissquote Bank.