- FTSE 100 declines 18 points to 10,844
- Wall Street turns red mid-morning
- BP and Shell rise on higher oil prices
- Retail sales rise 1.3% in July
Close: Frustrating day for stocks
London's FTSE 100 had a mixed session, as a rebound in oil prices revived inflation fears and kept investors cautious ahead of key US inflation data later this week.
Ultimately, the blue-chip index relinquished early afternoon gains to close 18 points down at 10,844.19. On Wall Street, stocks also turned around mid-morning as oil rebounded.
The main driver was renewed tension around the Strait of Hormuz, after President Donald Trump said he'd told US negotiators to include Iranian compensation demands in any future talks, complicating hopes of a swift reopening. Brent crude responded by climbing back towards $90 a barrel.
That gave the FTSE its usual split. BP rose 2.2%, and Shell gained 1.8%, propping up the index thanks to their heavy weighting, but the broader market struggled. As Tickmill Group's Patrick Munnelly put it: "Energy strength can mechanically support the FTSE 100 because of BP and Shell's size, but the same oil move can hurt the domestic economy, reduce real incomes, and delay any easing in monetary conditions."
Insurers, asset managers, consumer names and some industrials all lagged, with investors reluctant to take big positions before the US inflation report lands.
1.15pm: Oil trickles lower
The FTSE 100 is holding above water (just), helped by a pullback in oil prices.
As the afternoon progresses, the blue-chip index is now 7 points up at 10,869.60.
Saxo UK's Neil Wilson attributed the turnaround in stocks and Brent crude, which is marginally lower at $87.70 a barrel, to comments by Pakistan's Defence Minister, who signalled to reporters that the US and Iran are “close to some arrangement”, which he said was “shaping up in favour of peace”.
"Moves remain tentative as investors assess latest developments as perhaps just the latest barrage of noise from the conflict," added Wilson. "Markets remain sensitive to headline risk but not taking on any meaningful direction off speculative comments."
Wall Street futures also remain positive, with the Nasdaq expected to open 0.4% higher, while S&P 500 futures are up 0.2% and those for the Dow Jones are 0.1% higher.
11.45am: Footsie turns around
The FTSE 100 has broken into positive territory as the session reaches the halfway stage, but it's tentative with a gain of just 6 points to 10,868.53.
Across the Atlantic, it's a mixed picture, with the Dow Jones Industrial Average expected to open marginally lower, while S&P 500 futures are pointing to a small gain, and those for the Nasdaq are up 0.25%.
Tickmill Group's Patrick Munnelly says tomorrow's US CPI data for July is in focus now, with inflation anxiety back in the driving seat as Brent’s four-day surge forces investors to rethink last week’s post-payrolls relief.
"Government bonds are selling off across Asia-Pacific, the dollar remains firm, gold has broken higher, and the yen is again under pressure," Munnelly said. "The central issue is straightforward: softer US jobs data reduced the odds of an immediate Fed hike, but oil near $88/bbl makes it much harder for policymakers to sound comfortable."
"The bond market is still digesting Monday’s Treasury selloff, with US 10-year yields rising 6bps to 4.71% before the Asian session. There was no cash Treasury trading during Asian hours due to Japan’s public holiday, but Treasury futures weakened, and regional bonds followed the US lead. Government bonds in Australia and New Zealand declined, reflecting the global inflation channel from higher energy prices. The message from rates markets is that Friday’s weak labour data is no longer enough on its own to anchor yields."
10.15am: Mired in the red
The FTSE 100 is now firmly in the red as the session progresses, now down 27 points at 10,835.12.
Spirax has extended its losses, while insurers and money managers Legal & General, M&G, Prudential and Standard Life also remain under pressure, down between 1.9% and 3.8%.
“The FTSE 100 dipped 0.2% as strength in energy stocks was offset by weakness in consumer cyclicals and industrials. Steam engineer Spirax fell 10% as investors were disappointed by the lack of upgrades to earnings guidance in its half-year results," commented AJ Bell's Dan Coatsworth.
“Oil prices continue to ebb and flow as the narrative around the Iran war takes endless twists and turns,” Coatsworth added. “Brent crude has put on $10 in less than a week, which is a significant move, with the black stuff now trading just below $89 a barrel. It’s troubling but not enough to cause panic. Instead, it’s knocked the wind out of investors’ sails and left European markets drifting sideways.
9.15am: Retail sales lose some summer sparkle
UK retail sales growth slowed in July, with total sales up 1.3% year on year, below the 1.8% 12-month average.
Food was the bright spot, rising 3.8% as warm weather, home entertaining and England’s World Cup run encouraged spending. Non-food sales fell 0.7%, however, as shoppers stayed away from stores in the heat and delayed bigger-ticket purchases.
Clothing and smaller treats such as beauty products held up better, while furniture and computing struggled. Online non-food sales rose 1.3%, with online penetration edging up to 35.9%.
Looks like shoppers are feeling a little more confident, but tight budgets remain a concern.
8.45: US inflation in focus
The FTSE 100 has succumbed once more, and is now 23 points down at 10,839.18 as the jump in the oil price over the past few days puts inflation firmly back in the spotlight.
Markets are heading into Wednesday's US CPI report with inflation anxiety back in the driving seat, according to Tickmill Group's Patrick Munnelly, as Brent crude's four-day surge forces a rethink of last week's post-payrolls relief.
Government bonds sold off across Asia-Pacific, the dollar stayed firm, gold broke higher and the yen came under fresh pressure. "The central issue is straightforward: softer US jobs data reduced the odds of an immediate Fed hike, but oil near $88/bbl makes it much harder for policymakers to sound comfortable," Munnelly said.
US 10-year yields rose 6 basis points to 4.71% ahead of the Asian session, with Treasury futures weakening and regional bonds following the US lead despite a Japanese holiday keeping cash markets shut.
Oil is doing the driving. Brent is holding around $87.75 a barrel after jumping roughly 5% on Monday, its fourth straight session of gains and over 12% above last week's low. Munnelly pointed to Trump's fresh demand for compensation from Iran as further dimming hopes of reopening the Strait of Hormuz any time soon. "For energy markets, this is no longer a clean reopening story; it is a stalemate with a rising risk premium," he said.
Friday's soft jobs data had eased fears of an imminent Fed hike - but the oil rally is putting that patience to the test.
8.15am: Lacklustre start to trading
After a wobbly start, the FTSE 100 is edging higher, but only just.
About 15 minutes into the session, London's blue-chip index is 3 points up at 10,865.00 as it drifts in and out of the red, with little impetus.
Lion Finance Group PLC (LSE:BGEO) is leading the gainers, up 5%, after reporting second-quarter results.
Unsurprisingly, BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) are up 1.7% and 1.1% respectively, buoyed by the resurgent oil price.
Rounding up the top 5 gainers so far this morning, Melrose Industries PLC (LSE:MRO, OTC:MLSPF) and Scottish Mortgage Investment Trust PLC (LSE:SMT) have gained 1% and 0.7% respectively.
On the loser board, Spirax Group PLC (LSE:SPX) has slumped 5.6%, M&G PLC (LSE:MNG) is down 2.2% and Legal & General Group PLC (LSE:LGEN) is down by a similar margin.
Intercontinental Hotels Group PLC (LSE:IHG) has shed 2% despite saying it remains on track to meet full-year consensus profit and earnings expectations after it reported half-year results.
Rounding up a bad start for insurers and fund managers, Prudential PLC (LSE:PRU) has shed 1.4%.
7.30am: Rising oil stokes inflation fears
Markets caught a darker mood yesterday as oil kept climbing and the Strait of Hormuz standoff dragged on with no deal in sight, reviving talk of rate hikes on both sides of the Atlantic, according to Deutsche Bank's Jim Reid.
Brent crude jumped 4.99% to $87.72 a barrel, marking its fourth straight day of gains and the first time it has surpassed $85 this month, Reid noted. The 10-year Treasury yield rose 6.2 basis points, wiping out its entire post-payrolls decline, as September Fed-hike odds returned above 50% ahead of tomorrow's CPI print.
There was still no sign of a deal to reopen the Strait, Reid said, and rhetoric between Washington and Tehran heated up. Iran's foreign ministry said talks with Oman were "progressing smoothly and constructive," but tied reopening to the US "ceasing its illegal actions, lifting the siege, and compensating for damages." That demand for reparations drew a sharp response from President Donald Trump, who said he was "likewise demanding compensation from Iran" and would put that "firmly into any, and all, future negotiations."
With shipping through Hormuz still at a standstill, Reid said inflation fears crept back in, with the 1-year Euro inflation swap rising to 2.39%. Markets now price a 52% chance of a September Fed hike, up from 44% on Friday, and a 90% chance at the ECB, up from 85%.
Another dull start predicted
The FTSE 100 has been called lower as continued uncertainty in the Middle East and resurgent oil prices add to the mid-summer malaise. London's blue-chip index is expected to drift around six points lower when trading gets underway shortly, after ending Monday's session 39 points down at 10,862.50.
It was a similar picture on Wall Street, where the Nasdaq led stocks lower at Monday's close, down 0.3%. The Dow Jones Industrial Average fell 0.1%, and the S&P 500 dropped 4 points. Oil prices, meanwhile, surged more than 5% amid continued speculation over a potential reopening of the Strait of Hormuz.
"Uncertainty in the Middle East and the rebound in oil prices, leading to a rebound in global yields, are weighing on indices near record-high levels," said Swissquote's Ipek Ozkardeskaya. "US and European indices stagnated near ATHs yesterday, as Nvidia's fresh $500bn funding package from Wall Street heavyweights reignited worries about circular deals, outweighing the 45% sales surge announced by TSMC."
Asia is mixed this morning, with Seoul's Kospi up 1%, Hong Kong's Hang Seng down 1% and the Shanghai Composite off 0.5%. Tokyo's Nikkei is closed for the National Mountain Day holiday.
