- FTSE 100 down 30 points to 10,838
- Housebuilders, airlines climb as oil and bonds fall
- AstraZeneca drops on reports of Bristol-Myers merger talks
- Shell sells UK and EU renewables p'folio to Total
4.14pm: AZ and commodities drag offsets oil optimism
AstraZeneca is down 9.3% now, and that weight alone would be enough to drag on the Footsie.
But other heavyweights are down too, including most of the big commodities presence: Rio Tinto, Anglo American, Glencore and BP. Shell is up 0.3% after its renewables disposal deal.
British American Tobacco, Imperial Brands, GSK, Tesco, IG Group and two Coca-Cola bottlers.
For the wider market, lower oil was mostly not negative.
"While it hurt BP, Shell and other commodity-linked names, it also helped reduce inflation fears, pushed UK bond yields lower and supported rate-sensitive sectors," says Patrick Munnelly at Tickmill.
The FTSE is mixed rather than decisively risk-off, he says, with the "domestic rate-relief trade clearly visible underneath", of which the housebuilders are the main beneficiaries.
Vistry is up 7%, with Barratt, Bellway, TW and Persimmon all up 3.3-2.4%, with Berkeley lagging.
"Falling gilt yields improved sentiment toward housing stocks because lower long-term rates can ease mortgage-cost expectations, support affordability and improve the valuation of interest-rate-sensitive equities," says Munnelly.
3.20pm: Yen action
The yen has been one of the big narratives of the last few days but one that many investors probably don't feel like they should care a whole lot about, and is why the US Treasury has teamed up with its Japanese counterpart to help with the sizable financial deployment.
The yen's sudden surge - with the USD/JPY falling from almost 164 last Thursday to below 156 earlier and 157 now - matters immensely to global investors because it can directly impact varius global market factoeas.
It can force traders to unwind the "carry trade", where cheap Japanese currency is borrowed to buy higher-yielding assets elsewhere, which can drain liquidity from the market.
It can also prompt Japanese investors to bring money home, potentially pushing up US borrowing costs, while creating an earnings headwind for overseas companies selling into Japan.
Barclays forex analysts say: "In addition to the historic joint nature of the intervention, we believe a larger build-up of JPY carry trades and the scale of the move could result in a bigger impact compared to previous instances.
"Even if the JPY were to strengthen further in the near term, we continue to believe that longer-term downward pressures remain in place. A transition to a longer-term JPY appreciation trend, as seen after 2022 and 2024 intervention cycles, still appears unlikely.
"In our view, the BoJ’s messaging at the July meeting was broadly in line with our long-held baseline that the next rate hike is most likely to come in October.
"That said, the combination of the recent coordinated FX intervention and Treasury Secretary Bessent’s subsequent remarks has increased the risk that the tightening timetable could be brought forward to September, depending on subsequent FX developments and any further signals from Washington."
2.47pm: Microsoft, Amazon, Alphabet lead Wall Street higher
Wall Street has opened firmly higher, with the Dow surging 604 points, or 1.2%, while the S&P 500 has gained 0.7% and the Nasdaq has climbed 0.9%.
Microsoft is leading the Dow with a 4.3% rise, followed by Boeing and Amazon, both up around 4%.
Technology stocks are driving the broader rally, with Amazon, Alphabet and Adobe all advancing strongly, while Intuitive Surgical has jumped 5.1%, but the rally is leaving much of the semiconductor sector behind, with Arm and Seagate tumbling 7.3%, while Western Digital and Micron have slumped 5.5%, ahead of Lam Research, SanDisk, Intel and Marvell
Like in London, travel shares are also higher, with Norwegian Cruise Line and United Airlines gaining about 5%, and Carnival up 4.4%.
2.16pm: Alibaba pulls new AI out of the hat
Shares in Alibaba Group rose 7% in Hong Kong and are up in pre-market trading in New York after the Chinese technology group unveiled the most capable version yet of its Qwen artificial intelligence model.
Unsurprisingly, Qwen 3.8-Max was said to be the strongest model in the series to date, carrying 2.4 trillion parameters, whatever that means.
The model will be made fully open-source next week, meaning developers will be able to download and adapt it rather than merely access it through Alibaba's platforms.
1.39pm: End of cheap food?
UK supermarkets are better placed than peers in other countries as food prices rise faster than before the pandemic and shoppers eat at home more often, according to UBS.
In a new report entitled "The End of Cheap Food?", the Swiss bank questioned whether the long-term global food inflation average of about 2.5% had become obsolete.
In contrast to the UK, UBS was neutral on the more fragmented US food retail market, arguing that intense competition would largely limit their ability to pass higher costs on to shoppers. Continental Europe is similar, facing many of the same pressures, with greater fragmentation diluting pricing power.
UBS identified several forces likely to keep food prices rising more quickly over the medium to long term, with one being climate-related supply shocks, which alone could add between 0.9 and 3.2 percentage points to inflation, with global heatwaves and a developing El Niño increasing the risks in 2026.
12.27pm: A little wind behind the sails
The FTSE 100 is getting a little bit of wind in its sails as we move into the afternoon.
Persimmon, Smith & Nephew, St James's Place, Howden Joiners, Rolls-Royce, Barrat Redrow and Kingfisher are top of the leaderboard, all up 3% or more.
IG Group and AZ, two stories where investors seem unhappy about deals, are the biggest fallers, down 6.9% and 4.8%.
US futures are in the green too, with the Dow Jones seen rising 0.6%, while the S&P 500 and Nasdaq futures are being called around 0.4% higher.
11.57am: Shell sells onshore renewables unit
Shell has agreed to sell its European onshore renewables business to France's TotalEnergies for an undisclosed sum.
The deal includes about 500 megawatts of solar and wind capacity in operation or under construction across the UK, Italy, Netherlands and Spain, together with a 3.5 gigawatt pipeline of renewable and battery storage projects.
Machteld de Haan, Shell's downstream, renewables and energy solutions chief, said the transaction reflected the group's strategy of "actively managing and high-grading its power portfolio".
11.29am: Maybe the AZ report is wrong?
UBS's Matthew Weston is part of the chorus of analysts surprised by the AstraZeneca merger report, though he concludes with a different suggestion.
First, he notes that big pharmaceutical mergers have historically damaged research productivity, as staff focus on job security during integration rather than the science.
The industry has since pivoted towards large bolt-on deals, such as AZ's purchase of Alexion, which add a new adjacency rather than overlapping operations.
"We note that AstraZeneca's most challenging period of profit pressure from patent expiries falls from 2031-33E (Imfinzi, Tagrisso, Calquence). As such, the market will likely focus on whether a potential merger to realise synergy benefit presumably around 2030E would be able to address this dip.
"We wonder if the press reports may relate to a more focused partnership between the two companies on a single product or franchise."
11.02am: Iran and Hormuz hold key for UK economy
In its latest economic outlook, EY has forecast that UK GDP could slow from 0.5% this year and then shrink 0.2% next year if the Gulf war is not resolved and the Strait of Hormuz remains closed.
If the strait reopens by the end of September, EY forecasts growth of 0.9% this year and 1.2% in 2027.
As a reminder, UK GDP grew 0.6% in the first quarter of 2026, followed by expansion of 0.7% in the three months to May.
"The UK economy has proved more resilient than many expected this year, prompting a modest upgrade to our growth forecast," said EY UK chief economist Peter Arnold.
"Ongoing disruption to global energy markets will now start to test this economic resilience.
"If the strait of Hormuz reopens in the coming months, we expect the UK to avoid a more pronounced downturn, but an extended closure into 2027 would raise inflation and could push the economy into contraction next year."
He adds: "As growth becomes harder to sustain, the UK is likely to rely increasingly on those sectors that have underpinned economic performance in recent years, particularly technology and high-value business services.
"At the same time, longstanding pressures in construction remain a concern. Rising project costs, persistent labour shortages and weak productivity growth risk constraining the delivery of major infrastructure projects at a time when demand remains high."
10.10am: PMI analysis
Today's manufacturing PMI has a lot of moving parts.
The PMI fell to 51.9 in July from 52.5 in June, below the flash reading of 52.8, means manufacturing activity "continued to rise at a healthy clip in July", says says Rob Wood at Pantheon Macroeconomics.
The drop was mostly driven by a sharp contraction of companies' materials inventory buildup, rather than a deterioration in the main activity balances.
"The output index of the PMI actually rose month-to-month, by contrast, and is consistent with activity ticking up by 0.6% three-months-on-three-months, down from the latest official reading of 1.5% in May."
Still, some of the forward-looking activity balances worsened, with the future output balance dropping to 68.7 from 69.4, but the new orders balance jumped to 52.3 from 50.6 in June.
Wood concludes by saying that the Bank of England's rate setters "will be comforted by price pressures for manufacturers easing in July", with the input price balance dropping to a five-month low, despite gyrations in energy markets, and the output price balance falling too.
9.55am: Housebuilders build gains
Housebuilders are surging this morning, which looks like it could be to do with falling gilt yields brightening the outlook for borrowing costs.
Vistry has surged 7.5%, Bellway 5%, Persimmon 4.6% and Taylor Wimpey 4.1%.
The yield on the two-year gilt has dropped nine basis points to 4.33%, while the 10-year yield has fallen eight basis points to 4.98%. (Lower government borrowing costs can feed through to cheaper mortgage pricing, supporting housing demand and the value of builders' future earnings.)
The move follows the sharp slide in oil prices on hopes of renewed US-Iran talks, though Brent crude has crept up from lows earlier this morning, now down 4% at $84.40.
Russ Mould at AJ Bell says: "News Washington has cancelled strikes and will resume talks with Tehran, apparently after pressure from its allies in the Gulf, has seen Brent crude oil drop below $84 per barrel.
"But the market has been here before and a more concerted fall in crude and in government bond yields will require greater evidence that a lasting resolution can be forthcoming this time round."
9.42am: UK manufacturing PMI paints mixed picture
The UK manufacturing PMI for July has come in at 51.9, down from 52.5 in June and 52.8 in the preliminary July reading to a four-month low.
But the first month of the third quarter saw "further positive signs" from the sector, said S&P Global, with upturns in production, new business and new export orders, while the impact of cost inflation and supply chain disruption eased.
However, the PMI has remained above the 50 mark that separates growth and contraction for nine months in a row, while four of the five PMI sub-components were at levels consistent with an improvement in overall operating conditions.
Output, new orders and employment all rose, while average supplier delivery times lengthened.
The month-on-month fall in the level of the PMI was due to a steep reduction in stocks of purchases, slower jobs growth and a sharp easing in the rate of increase in vendor lead times.
9.14am: FTSE in the red
The FTSE 100 is down 2 points at 10,866 after an hour and a bit of trading, as AstraZeneca continues to offset the gains from four fifths of the index.
Due to the big fall for its second larggest constituent, London is lagging the rest of Europe, where the German DAX is up 1.28%, with other benchmarks in Paris, Milan and Madrid at 0.7-0.9%
The Stoxx 600 is up 0.4%.
"Stocks are in a buoyant mood as we start August," says market analyst Kathleen Brooks at XTB.
"This is another huge week for financial markets. Firstly, there is a large amount of fresh economic data, including the latest labour market data from the US. 20% of the S&P 500 report earnings this week, including Palantir and SanDisk. SpaceX will also release its first earnings report on Tuesday. The market wants to know if the tech selloff is over, what the yen will do next after unprecedented multilateral intervention to prop up the currency, and US Treasury yields are also in focus."
The Nasdaq is currently expected to open higher by more than 0.8% after last week saw US stocks make a comeback from Thursday onwards.
8.47am: AZ deal 'perplexing'
More analysis of the Astra deal, this time from Michael Leuchten at Jefferies who says it "would be more than a head scratcher" and he is "a bit perplexed by the news".
He says the "why" element of the deal is "perhaps not yet clear to us".
"We suspect that most people will focus on the potential to establish an even bigger oncology powerhouse, with the resultant portfolio likely the broadest in the industry.
"However, beyond the regulatory hurdles we would argue that pipeline assets could be sourced elsewhere, as AstraZeneca has been doing, particularly in China."
Leuchten adds: "One consideration could be that there is a strategic desire to move closer to the US market (AZ recently changed its US listing) and maybe more is more (more cash to spend on R&D - like when AZ bought Alexion) but using what would be a lot of premium equity to acquire a low PE business would seem drastic to us."
8.31am: AstraZeneca talks suggest 'reduced confidence' in outlook
AstraZeneca's reported talks with Bristol Myers about creating a $400 billion company appear to make "limited strategic sense for Astra and would likely be subject to antitrust scrutiny, given the overlaps of their oncology portfolios", says John Murphy, senior analyst at Bloomberg Intelligence.
He points to very different growth outlooks, with double-digit earnings gains forecast for AZN through to 2030, with BMS set for "continued declines, due to multiple patent expiries".
"While both are focused on developing promising pipelines, history suggests such megamergers hamper pipeline progress," Murphy adds.
"Major cost savings via eradication of overlapping infrastructure is one obvious benefit, but would suggest reduced confidence at Astra in its pipeline and growth outlook."
8.15am: FTSE flat as AstraZeneca and oil giants slump
The FTSE 100 has started in an uncertain manner, currently up around four points at 10,872.
Top of the leaderboard are housebuilders Persimmon and Barratt, both up 4%, along with aerospace groups Melrose and Rolls-Royce, hotelier IHG and British Airways owner IAG.
But a big weight is coming from AstraZeneca, down 7% on the merger report from Sunday. Investors don't like the sound of it so far, it seems.
Shell and BP are down 1.6% and 2.4% too, as oil prices pull back.
7.59am: Clarkson's charm
Clarkson has posted strong interim profits and says it expects full-year results to come in "materially ahead" of market forecasts after disruption in the Strait of Hormuz helped the shipping services group deliver record first-half profits.
Underlying pre-tax profit jumped 56% to £61.5 million in the first six months of 2026, on revenue up 39% to £413.5 million.
Clarkson said strong underlying trading was amplified by the Hormuz turbulence, as the Iran war disrupted global trade and increased demand for its shipbroking, market intelligence and advisory services.
7.47am: AstraZeneca in talks over $400 billion mega-merger
AstraZeneca is in talks with Bristol Myers Squibb over a potential merger to create the world's fourth-largest drugmaker by market value, says the Financial Times in a big scoop yesterday.
The FTSE 100 group is worth £264.9 billion, or about $264 billion, and BMS roughly $133 billion, putting the combined valuation close to $400 billion.
The story says the deal structure is unclear but would probably involve cash and shares.
There are some fairly chunky obstacles, with both companies having large cancer-drug portfolios, including directly competing lung cancer treatments, while any deal is likely to face intense antitrust and political scrutiny on both sides of the pond.
Discussions have taken place in recent months and could produce an agreement soon, although the FT cautions that they could be delayed or collapse. AstraZeneca declines to comment.
7.33am: easyJet gives Castlelake til Friday to make new bid
EasyJet has given private equity group Castlelake four more days to decide whether to make a firm takeover offer, bringing its deadline into line with rival bidder Apollo.
Castlelake and Apollo must now confirm by 5pm on Friday, 7 August whether they intend to make binding offers for the airline or walk away.
Apollo gatecrashed Castlelake's takeover on 10 July, agreeing a possible £7.15-a-share cash offer with easyJet's board, worth about £5.4 billion.
7.17am: FTSE 100 Live: Positive start to new month predicted
London stocks are expected to open higher on the first trading day of August as hopes of a diplomatic breakthrough between the US and Iran sent oil prices sharply lower.
FTSE 100 futures point to a gain of 25 points on Monday, entering the new month after gaining 3.5% in July, having hit a series of all-time intraday highs last week and peaked at 10,989.45 on Friday.
The new week has begun with a 5.1% fall to $83.41 a barrel for Brent crude after Donald Trump said planned US strikes against Iran had been cancelled and fresh talks would begin on Monday.
The US president said he held off at the urging of Gulf allies Qatar, the United Arab Emirates and Saudi Arabia.
Trump said the proposed deal would include the “immediate, complete and total” reopening of the Strait of Hormuz and an end to Iran’s nuclear threat.
Iranian officials also said negotiations with Oman over a new shipping route through the strait were nearing completion.
However, Tehran stressed that any agreement would not amount to restoring access to the position before the conflict began, while shipping traffic remained subdued after further reports of attacks on vessels.
Jim Reid at Deutsche Bank said markets had welcomed the prospect of a “diplomatic off-ramp”, with US Treasury yields falling by between three and five basis points.
The calmer start follows a turbulent July in which oil prices were yanked over 20% higher, pushing up government borrowing costs, while a reassessment of the artificial intelligence trade pushed the Philadelphia Semiconductor Index down over 20%.
Attention is also on the yen after confirmed co-ordinated intervention by Japan and the US helped the currency record its largest weekly gain against the dollar in almost two years.
Asian markets are mixed this morning, with South Korea’s Kospi tumbling 5.2% and Japan’s Nikkei falling 1.2%, while India’s Sensex gained 0.8% and Hong Kong was flat.
