- FTSE 100 falls 36 points to 10,363
- Burnham scores 54.8% in Makerfield vote
- UK public sector borrowing surges
- Retail sales rise 3.2% y/y in May
- Brent crude tops $80/bbl
4.55pm: Stocks pull back
Weakness in precious metals saw another day of losses for the FTSE 100, with the index finishing the day down 36 points at 10,363.
“London’s premier index is unable to catch a break. While the selling in oil names has eased just as the rout in oil has undergone a small reversal, the FTSE 100 is still under pressure thanks to the selling in miners, most notably that most volatile of commodities, silver and in its related mining stocks,” IG chief market analyst Chris Beauchamp said.
“The divergence between the FTSE and its US cousins is widening again, with the added spice of political drama to cloud the outlook for UK assets once more.”
3.13pm: Looking ahead
As the week winds down with barely a whimper, let's peek at what's brewing for the markets next week, because three FTSE 100 heavyweights are about to bare their souls.
Babcock International kicks things off Monday with full-year results, and this defence contractor has been the darling of investor portfolios lately given the geopolitical backdrop and its sprawling global footprint.
The group's been firing on all cylinders—think Virginia Class submarines, Indonesian maritime partnerships, and Arrowhead licences—which explains why the shares have rocketed 95% over two years, even if they've stumbled 18% since January as valuations caught up with enthusiasm.
Tuesday brings Bunzl's trading statement, and this one's a trickier read because the group got absolutely battered last year after a profit warning that left investors nursing some deep wounds.
Things have steadied since, with shares climbing 23% year-to-date, but the damage lingers: the stock remains 13% down over two years as North America struggles with sales weakness and product price deflation.
The real question is whether Bunzl can sustain this relief rally or if investors stay cautious despite 18 consecutive years of dividend increases.
Wednesday closes the hat-trick with Berkeley Group's results, and here's where things get genuinely thorny for the housebuilder.
Berkeley stopped buying new land and pencilled in annual profits of £350 million going forward versus the previous £450 million forecast, which spooked investors enough to send the shares tumbling 16% year-to-date and out of the FTSE 100 entirely.
The London and South East housing market that's been both blessing and curse is now showing red flags, with new housing starts at levels not seen since the financial crisis.
It's cyclical, sure, and the UK's chronic housing shortage will eventually ring the dinner bell again, but for now, investors are decidedly unconvinced
2.02pm: Burnham's fiscal straitjacket
Andy Burnham's decisive win in the Makerfield by-election has opened the door to a potential challenge for the Labour leadership, with prediction markets now pricing in a 91% probability that he will become Prime Minister by the end of 2026.
Burnham secured 54% of the vote with a comfortable 20-point lead over the Reform candidate, meeting the threshold needed to stand in a leadership contest should one materialise.
Polymarket bettors have surged Burnham's odds by 84 percentage points following his return to Westminster, with the probability of him becoming Prime Minister by year-end now overwhelming at 91 cents per share, dwarfing all other potential successors.
A leadership challenge requires the backing of just 20% of Labour MPs, or 81 parliamentarians, to trigger a formal contest overseen by the party's ruling committee.
The leadership race would likely conclude before the Labour conference on 27 September, avoiding an extended period of political limbo that could unsettle investors.
According to UBS analysis, markets have keyed closely on whether potential successor candidates, particularly Burnham, remain committed to the government's fiscal rules, which constrain spending and borrowing.
Burnham had previously criticised the government for being "in hock" to bond markets, but more recent comments suggest he "supports fiscal rules," offering some reassurance to investors nervous about a potential leftward shift in economic policy.
12.47pm: Admiral downgrade
RBC Capital has downgraded Admiral Group to 'sector perform', cutting its price target to 3,450p from 3,560p, as shares fell 4% to 3,227.83p on heightened caution ahead of first-half results on 6 August.
The broker cited weaker near-term sales volumes and profit margins in UK motor insurance, particularly in the first half, and took a more conservative view of current profit forecasts despite the stock's strong performance year-to-date.
RBC cut its earnings per share forecasts by 6%, 4%, and 2% for financial years 2026, 2027, and 2028, respectively, reflecting insurance pricing increases that have lagged inflation longer than expected and the impact of less-profitable business written in 2025.
The cumulative earnings cuts total roughly 10% so far this year, including a 4% reduction made in March when the broker last flagged weakness in motor insurance pricing.
11.36am: Goldman cools on gold
Goldman Sachs slashed its year-end forecast by $500 an ounce, blaming the Federal Reserve's shift away from near-term rate cuts.
The revised target of $4,900 assumes bullion still gains ground in the second half, though the bank's tone has shifted from buoyant to guarded.
Goldman's analysts now expect US rate cuts in June and December 2027, having previously pencilled them in for late 2026 and early 2027. That pushes any meaningful relief for gold further down the calendar.
New Fed Chairman Kevin Warsh's inaugural meeting struck a surprisingly hawkish tone, signalling the central bank may hike as soon as September if inflation remains sticky. The problem for bullion: higher rates make non-yielding assets less attractive to investors hunting for returns.
Still, central bank demand remains constructive, with official sector purchases expected to run at 50 tons monthly this year. Gold slumped 1.7% to $4,152.60 and FTSE 100-listed Endeavour, the gold producer, fell 2.7%, caught in the broader selloff.
10:30am: Oil recovers some lost ground
BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) are holding their positions on the FTSE 100 leaderboard this morning, up 1.6% and 0.8% respectlively, after Brent crude clawed back some of the week's losses.
AJ Bell's Dan Coatsworth reckons that the uptick in oil prices and weakness in Asian markets this morning came as negotiations between Washington and Tehran were apparently put on hold while Israel continued to pursue strikes against Lebanon.
"These developments are a reminder that for all the relief around a deal being agreed in the Middle East, there remain material obstacles to returning to a pre-war situation," Coatsworth added.
The FTSE 100, in the meantime, has dipped back into the red and is currently 18 points down at 10,381.78.
9.15am: Footsie breaks higher
The FTSE 100 has retraced early losses and is now 10 points up at 10,409.56 in what's likely to be a quiet session, with US and some Asian markets closed for public holidays and as investors digest the week's news, including Andy Burnham's win in the Makerfield by-election, which could spark a Labour Party leadership challenge.
Referring to May's government debt figures, AJ Bell's Danni Hewson called them "a chillingly well-timed reminder to any would-be prime minister that the bond markets matter," noting debt interest alone accounted for almost half of May's borrowing.
Hewson said borrowing costs will be watched closely amid the anticipated Labour leadership contest, adding that the current deficit is already £7 billion higher than last year "despite the positive impact of tax changes." Hewson added that the government "needs to be ready to take advantage of any positive momentum" rather than get drawn into a "long, destabilising fight for Number 10."
9am: Gilts under pressure on Burnham's win
UK government bonds have come under pressure this morning after Andy Burnham's commanding win in the Makerfield by-election, with gilt yields jumping roughly 5 basis points across the curve out to the 30-year.
Saxo Markets strategist Neil Wilson said markets are already pricing in political risk. "Bond yields this morning have jumped... UK gilts have dropped out the gate faster than bunds have," he said, pointing to fears that Burnham's strong mandate could pave the way for a "leftwards lurch" in policy.
With Burnham securing 55% of the vote against Reform's 35%, Wilson said the result hands him "his point of maximum power," with a new PM and Chancellor likely within weeks. He warned that the choice of Chancellor will be critical: "A credible, ostensibly fiscally responsible candidate would send the 'right' signals to the bond market." That nervousness was compounded by fresh data showing UK borrowing rose well above forecasts in May.
8.45am: Sunny weather lifts retail sales
UK retail sales provided a rare bright spot for the economy in May, with volumes rising 2.7% month-on-month and 3.2% year-on-year, comfortably ahead of forecasts for 1.9% growth. The rebound was driven by warm weather and retailer promotions, which boosted spending across food, clothing and household goods stores.
However, the stronger-than-expected sales figures failed to significantly lift market sentiment. Richard Hunter, head of markets at Interactive Investor, noted that while good weather and discounts encouraged consumers to spend despite geopolitical headwinds, "some momentum could be established" if promotional activity continues through the summer and World Cup-related spending materialises.
The positive retail data was offset by signs of broader economic weakness. A separate report showed consumer confidence slipping back into negative territory, while government borrowing in May came in £5.6 billion above expectations.
8.15am: Soggy start for blue chips
The FTSE 100 edged lower at the open in what's likely to be a quiet end to a tumultuous week of central bank activity and hopes of an end to the US-Iran conflict, with US markets closed for the Juneteenth public holiday.
Much attention will also be paid to Greater Manchester Mayor Andy Burnham's decisive victory in yesterday's Makerfield by-election.
Shortly into the open, London's blue-chip index is 6 points lower at 10,393.98.
Admiral Group Plc (LSE:ADM) is leading the decliners, down 4.3%, while fellow insurer Aviva PLC (LSE:AV.) has shed 1.7%. Barclays PLC (LSE:BARC) is down 1.7% and previous metals miner Fresnillo PLC (LSE:FRES) is 1.6% off the pace.
Countering those losses, defence company Babcock International PLC (LSE:BAB) is up 1.9%, BP PLC (LSE:BP.) has added 1.2% on a slightly higher oil price and BAE Systems PLC (LSE:BA.) is 1.1% firmer in early trading.
Brent crude oil is trading 0.2% higher at $80.02 a barrel this morning, after sinking about 8% earlier in the week.
7.55am: Government borrowing balloons
The UK's public finances came under added pressure in May, with public sector borrowing reaching £23.3 billion, £5.4 billion more than a year ago and well above the £17.7 billion forecast by the Office for Budget Responsibility. According to the Office for National Statistics, borrowing over the first two months of the financial year totalled £46.3 billion, also higher than expected.
A major factor was the rising cost of servicing government debt. Debt interest payments hit a record £11.7 billion for May, driven largely by inflation-linked bonds, with changes in the Retail Prices Index adding £4.9 billion to costs.
While government income increased, helped by stronger VAT, income tax and corporation tax receipts, spending rose even faster. Higher interest on debt, inflation-related increases in departmental costs, and larger social benefit payments all contributed.
Meanwhile, public sector debt climbed to 95.1% of GDP, remaining near levels last seen in the early 1960s.
FTSE 100 pre-open
London's blue-chip shares are expected to extend Thursday's slide on Friday, capping an eventful week dominated by a US-Iran memorandum of understanding and central bank decisions shaped by the war's impact on global inflation.
The FTSE 100 is called 27 points lower on the futures market, having already shed 108 points to close at 10,399 yesterday after the Bank of England held interest rates steady.
Deutsche Bank's Jim Reid says the main UK story this morning is the Makerfield by-election result, with Greater Manchester Mayor Andy Burnham winning comfortably by 20 percentage points, taking 54.8% of the vote.
"That means he's now an MP again, putting him in a position where he can now challenge incumbent PM Keir Starmer for the Labour leadership," Reid noted.
"Burnham was already the strong favourite to become the next PM, and with the by-election victory, he's now at 91% this morning on Polymarket to become PM in 2026."
Overnight, hopes that the US-Iran peace deal will hold drove US stocks higher, with the Nasdaq leading the way up 1.9%, the S&P 500 adding 1.1% and the Dow up 0.1%. US markets are shut today for the Juneteenth holiday.
In Asia, Tokyo's Nikkei is down 0.25%, Seoul's Kospi is hovering near the 9,000 mark, off 0.2%, and Sydney's ASX 200 closed 0.9% lower. Hong Kong and Shanghai are closed for holidays.
