FTSE 100 falls 8 points to 8,826 UK inflation remains at 3.4% in May, well above BoE target ONS wrongly reports that annual inflation fell, when it was flat Israel-Iran tensions remain, but oil prices flatten off
12.05pm: FTSE and US futures drop
The FTSE 100 has dropped into the red, down just a handful of points, though.
Falls for drug giants AstraZeneca, the largest company on the index, and GSK are contributing factors, down 1.4% and 1.9% respectively.
This is likely to be after Donald Trump threatened drug import tariffs. The US president said tariffs on imported drugs could be imposed “very soon”, echoing comments from two months ago.
Earlier in the week, US health secretary Robert F Kennedy was reported to be looking at a crackdown on drug ads.
Fallers are led by Howden Joinery, down 3%, Ashtead down 2.4%, and Compass, down 2.1%.
Miners, airlines, housebuilders and financials are also down.
Meanwhile, US futures have flattened off, with those for the Dow Jones in the red, while S&P 500 and Nasdaq 100 futures are now up less than 0.1%.
11.20am: Raspberry Pi bosses sell shares
Raspberry Pi Holdings PLC (LSE:RPI) shares are down 2.75% this morning after CEO Eben Upton and finance chief Richard Boult both sold big chunks of shares after the expiry of their one-year IPO lockup period.
Upton sold £1.8 million worth, offloading 400,000 at 454.55p apiece.
Boult offloaded 100,000 at the same price.
Raspberry Pi floated in London last June, with the shares priced at 280p with Upton and Boult having watched the shares surge up to above 760p early this year.
10.13am: S&U reports improved trading, Tiger Royalties hails new ‘node’
More movers, this morning, including S&U PLC (LSE:SUS), up 10% after the motor and property lender said trading in the first two months of its financial year had exceeded expectations.
Advantage, its motor finance division, has bounced back from a regulatory review, with lending volumes up 50% and customer payment performance at its best since last October.
Elsewhere, Tiger Royalties and Investments PLC (AIM:TIR) jumped 55% after revealing that its newly acquired Tiger Alpha Bittensor Subnet is generating nearly $70,000 in monthly revenue, just a month after going live.
The subnet, a revenue-generating node on the decentralised Bittensor blockchain, is producing over six TAO per day, worth more than $2,300 at current prices.
Tiger is an intriguing AIM beast, with serial mining entrepreneur Colin Bird and serial tech entrepreneur Jonathan Bixby both on the board as it pursues a twin investment policy focused on mining and ‘utility memecoins’.
10.01am: House price growth slows
Official UK house prices data is in from ONS, showing an average increase of 3.5% to £265,000 in the year to April.
This annual growth is down from the 7% jump seen for March.
House price inflation slowed following changes to stamp duty in England and Northern Ireland, said Aimee North, ONS head of housing market indices.
She notes that the North East once again showed the highest annual increase, and the South West showed the lowest annual growth, while London was the only English region where annual inflation was higher in April (3.3%) than in March (0.9%).
“The rental market continues to cool,” she adds, “with the fifth month of slowing average annual growth across the UK. Private rent prices in Scotland grew at their slowest annual pace in three years.”
9.58am: AO in line, but warns on mobiles business
Shares in AO World PLC (LSE:AO.) have ticked lower despite the online electricals retailer posting full-year results showing a notable improvement in profitability and a continued recovery in margins.
Broker Stifel and house Peel Hunt both said the results were in line with its upgraded forecasts and landed at the top end of AO’s own guidance.
AO said the performance in its mobile phones business has been “materially behind our expectations and a drag on profits”, noting that the monthly billing post-pay market has “declined further”, and customer preference has shifted towards disaggregation of mobile contracts, ie SIM only.
As Peel Hunt notes that “management is intent on either getting the non-core mobile sites back to profitability this year or shutting them down, with the direction of travel likely to be known by autumn”.
Elsewhere, shares in CPP Group (LSE:CPP) have surged 37% after the company unveiled plans to exit all remaining legacy operations and focus exclusively on Blink, its high-margin parametric insurance technology platform.
The shake-up includes the completed £4.6 million sale of CPP Turkey and a three-year licensing deal worth £1.5 million for Blink’s cybersecurity product. A sale of CPP India is also on the cards, with a preferred bidder already lined up.
9.22am: A lot going on
There’s a lot going on for markets to take into account this week.
There’s generally been a risk-off tone, with renewed fears around a further escalation in the Middle East, “particularly amid increasing questions over whether the US might join Israel’s strikes against Iran”, says Deutsche Bank macro strategist Jim Reid.
A series of hawkish posts from President Trump towards Iran included demanding “UNCONDITIONAL SURRENDER”, that “we now have complete and total control of the skies over Iran” and suggested that Iran’s leader Ayatollah Khamenei could be targeted: “We know exactly where the so-called ‘Supreme Leader’ is hiding.
Axios reported that Israeli PM Netanyahu believes Trump will attack Iran’s underground enrichment facility at Fordow in the coming days, with CBS also reporting that Trump was considering joining the strikes against Iran’s nuclear facilities.
However, says Reid, “direct US involvement would risk Iranian retaliation again US facilities in the region, with the New York Times reporting that Iran was preparing for such action in the event of US strikes. This renewed escalation in rhetoric has left uncertainty hanging over markets”.
Those fears drove oil prices higher yesterday, but while Brent crude closed at its highest since February at $76.45 a barrel (apart from Friday’s intraday high of $78.50) it is slightly lower this morning at just under $76.
Reid says views on risk weren’t helped by a soft batch of US data yesterday, including both retail sales and industrial production falling in May.
The main US focus for markets right now is the Fed announcement this evening, where the current uncertainty and the potential for fresh inflationary spikes means they FOMC is widely expected to keep rates on hold again, “and it means the focus will be on the dot plot for where they expect rates to go next”.
Deutsche economists think it will only signal one rate cut this year, which would be a hawkish shift from March, when they still signalled two cuts.
US Treasuries rallied yesterday, sending yields lower, on a flight to quality, says Reid, while for Europe “it was a different story, as inflation fears from higher energy prices dominated, pushing yields higher across the continent”.
In addition, there was more upbeat data from Germany, as the expectations component of the ZEW survey bounced up.
9.03am: Markets all modestly higher
The FTSE 100 is up 0.2% and the FTSE 250 is lagging that gain at under 0.1%.
Sterling is up 0.3% against the dollar at $1.346, having fallen to a three-week low yesterday. It remains near two/three-month lows against the euro.
Looking across to the continent, the other major European indices are all up around 0.2%, like the Footsie.
Ahead of the Federal Reserve decision later, US futures are modestly higher too, with those for the S&P 500 and Nasdaq both pointing around 0.3% higher and Dow Jones futures up 0.2%.
8.41am: Inflation analysis
More views on inflation, where CPI was 3.4% in May, the same as in April. The ONS misreported the figures this morning, incorrectly saying May saw a drop in the annual rate from 3.5% in April, when the figure for April was actually also 3.4%.
Danni Hewson, AJ Bell head of financial analysis, says: “The problem with inflation data is that it’s looking back at what has already happened, whilst households have to look forward at what is to come.
“The price at the pump played a big part in the slight fall in headline inflation but the escalating conflict between Israel and Iran has impacted the oil price in the past week, with UK motorists already bracing themselves for hikes and airfares also expected to soar.”
She adds that while there has been some confusion about last month’s inflation rate because of an error in vehicle excise duty numbers, “people might be puzzled by differing headlines”.
Raj Badiani, economics director at S&P Global Market Intelligence, says he had expected higher CPI inflation in May amid UK firms facing higher payroll taxes and a hike to the national living wage from April.
Like most economists, he does not expect the BoE’s monetary policy committee (MPC ) will vote for a second successive rate cut at tomorrow’s meeting.
While he anticipates tamer inflation developments during the second half of this year, as soft demand conditions and accelerating employment losses are likely to result in slower earnings growth, Badiani says “the timing of the next interest rate cut is uncertain because of significant upside inflation risks” from a new spike in global oil and gas prices because of the intensifying conflict between Israel and Iran.
In this case, he says UK firms could ratchet up their prices to cover higher payroll costs and headline and services inflation rates “could be higher than we currently anticipate during the next few months, delaying the next rate cut until this November or early 2026”.
Nicholas Hyett, investment manager at Wealth Club, noted that UK inflation remains “far higher than elsewhere in Europe”.
He also says the turmoil in the Middle East has upset hopes that price increases would slowly roll off over the course of the next 12 months.
“The price of Brent crude has moved sharply higher despite key global oil routes remaining largely unaffected so far, and the conflict has the potential to disrupt global energy flows much more severely than it has so far.
“As a key input into pretty much everything, a spike in oil would drive up prices across the board. The inflationary risk from the Middle East, combined with already rising prices, could change the calculus for the Bank of England and make rate cuts that bit less likely.”
Matt Swannell, chief economic advisor to the EY ITEM Club, says headline inflation is “likely to edge upwards over the next few months, and the increase could be more pronounced if the recent rise in Brent Crude Oil prices is sustained.
“But we expect inflation to cool from October, as the positive contribution from the energy category wanes.”
He notes that the MPC has settled into a “cut-hold tempo” for interest rate loosening, with “little in today’s release that is likely to change the MPC’s views” but he continues to expect a 25bps cut at August’s meeting.
8.15am: FTSE 100 opens higher
The FTSE 100 has opened 10 points higher at 8,844.26.
Entain is the top riser, which seems to be on the back of a positive note from Deutsche Bank.
Aerospace group Melrose, accountancy software developer Sage Group, defence contractor Babcock, insurer Aviva and lender Barclays are among the top risers.
In fact, in the index’s top 20 largest companies, only AstraZeneca, GSK and Compass are in the red.
The drug giants, both down 1.4%, are among the bigger fallers, with Howden Joinery bottom of the list.
8.01am: Speedy growth remains in reverse as transformation continues
Speedy Hire PLC (LSE:SDY) has turned in final results showing lower sales and a swing to statutory losses, but said it “remains committed” to delivering its growth strategy through further investment in its fleet and transforming the business.
Revenue of £416.6 million in the year to end-March 2025 was down 1.2% compared to the prior year, blamed on challenging markets amid delays in government spending impacting major infrastructure projects, along with and slower than anticipated expansion of its new Trade & Retail business.
The dividend was kept flat on last year, with CEO Dan Evans saying: “Despite the macro-economic challenges, we have remained committed to, and in parts accelerated, the implementation of our Velocity strategy during its ‘Enable’ phase, which is setting the foundation for growth opportunities for the benefit of our customers and people, whilst maintaining shareholder returns.”
7.56am: PZ Cussons sells out of JV
PZ Cussons (LSE:PZC), the maker of Imperial Leather and Carex soaps, has agreed to sell its half of a Nigerian edible oils joint venture as it continues to review strategic options for its African businesses.
The FTSE 250 London-listed small cap said it has struck a deal to sell its 50% stake in PZ Wilmar to partner Wilmar International for $70 million (£51 million), with expected net proceeds of roughly $64 million (£47 million).
It also provided an update on trading across the group, saying like-for-like revenue growth of 8% for the year to May, with adjusted operating profit guidance narrowed down to £52-55 million, from £52-58 million before.
7.31am: Ocado wins contract extension
Ocado Group PLC (LSE:OCDO) has upsold one of its longest-running overseas customers from in-store fulfilment technology to a new delivery warehouse, or customer fulfilment centre (CFC) as it calls them.
Grocer Bon Preu, based in the Spanish region of Catalonia, is getting a new CFC built with the help of the FTSE 250 group, in Parets del Vallès, just north of Barcelona.
Bon Preu first signed a contract in 2017, when it was Ocado’s first overseas customer.
7.24am: Inflation buffeted by counteracting price movements
Inflation was “little changed” in May, says ONS acting chief economist Richard Heys, due to “a variety of counteracting price movements”.
He pointed to a fall in air fares in the month compared with a large rise at the same time last year, while motor fuel costs fell and the later timing of Easter and school holidays also affected pricing.
“These were partially offset by rising food prices, particularly items such as chocolates and meat products,” Heys said. “The cost of furniture and household goods, including fridge freezers and vacuum cleaners, also increased.”
David Bharier, head of research at the British Chambers of Commerce, said the elevated level of CPI, above the 2% Bank of England target, “remains a real concern for businesses and confirms that price pressures persist”.
He said CBI research shows that firms’ price expectations jumped after the autumn statement, which included the increase in employer NICs, and again following the US tariff announcement, while other short-term headwinds include rising energy costs and risks to global supply chains from the recent escalation of figthing between Israel and Iran.
“Any major disruption in the Strait of Hormuz could echo the supply chain shock of 2021, with surging oil and shipping costs. Many smaller businesses will have little capacity to absorb these pressures.”
7.15am: FTSE 100 called higher as inflation eases, but oil prices rise
The FTSE 100 could be lifted slightly higher on Wednesday as oil prices continue to increase, driven by the intensification of Israel’s bombardment of Iran, while softer UK inflation bodes well for further Bank of England easing.
On the futures market, London’s blue-chip index is seen rising around 5 points, while some European benchmarks are called lower.
Overnight, US stocks dropped, led by the tech-dominated Nasdaq, which fell 0.9%, while the S&P 500 and Dow Jones dropped 0.8% and 0.7% respectively.
According to figures from the Office for National Statistics this morning, UK inflation eased last month.
The consumer prices index rose 0.2% month-on-month, as expected, which meant that annual inflation eased to 3.4% in May from 3.5% in April, in line with forecasts.
Core CPI, which excludes energy and food, fell to 3.5% from 3.8%, as expected.
Services CPI, a key measure for the BoE, also softened to 4.7% from 5.4%, more than the 4.8% forecast.
5.30am What to watch on Wednesday 18 June
While a ‘no change’ decision from the Federal Reserve is expected on Wednesday, what they say alongside this is important, especially as the announcement will be alongside a summary of economic projections, also known as the “dot plot”.
This will show if the Fed policymakers still expect to make two more rate cuts this year, and another two next year.
In London company news, an insight into the UK construction sector will come from Speedy Hire PLC (LSE:SDY), where investors have been creeping back after February’s profit warning.
A UK inflation reading for May will come out at the same time from the Office for National Statistics, and will be of special interest ahead of the Bank of England decision a day later.
A month ago, higher-than-expected inflation in April was seen as likely to discourage the BoE from going too fast on rate cuts, but CPI is forecast to slow to 3.3% in May from the 3.5% in April, with core CPI inflation to slow to 3.5% from 3.8% in April, and services CPI inflation to drop to 4.7% in May from 5.4%.
Announcements due:
Trading update: S&U
Interims: Oxford Metrics, JPMorgan Indian Investment Trust
Finals: AO World, Speedy Hire
Economic announcements: Inflation Rate (UK), Current Account (EU), MBA Mortgage Applications (US), Building Permits (US), Housing Starts (US), Crude Oil Inventories (US), Federal Reserve Policy Decision (US)
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