The FTSE 100 edged higher on Tuesday as investors assessed UK public borrowing figures, developments in the Middle East and a series of corporate earnings announcements.
The London benchmark was up 0.12% at 07:10 GMT, while Germany’s DAX declined 0.09% and France’s CAC 40 gained 0.04%. Sterling was unchanged against the US dollar at $1.3367.
Figures from the Office for National Statistics (ONS) showed that UK public sector borrowing reached £18.3 billion in August, exceeding the Office for Budget Responsibility’s (OBR) forecast by £3.5 billion.
Oil prices advanced amid continuing Middle East tensions, while gold declined. In UK company news, Kingfisher raised its full-year guidance, Smiths Group reported operating profit ahead of forecasts, and M&C Saatchi recorded a decline in first-half operating profit.
UK Borrowing Exceeds OBR Forecast
UK public sector borrowing reached £18.3 billion in August, according to figures reported by the ONS.
The figure was £3.5 billion above the OBR’s forecast and represented the highest borrowing recorded for August outside the pandemic period.
Debt interest payments reached £8.8 billion for the month, while cumulative borrowing for the financial year to August totalled £77.3 billion.
That was £8.1 billion above the OBR’s March projection.
The figures added to scrutiny of the UK’s public finances ahead of the forthcoming Budget.
KPMG’s September outlook estimated that the Chancellor’s fiscal headroom had narrowed to approximately £12 billion from £23.6 billion at the spring forecast. The estimate reflects KPMG’s assessment rather than an official update to the OBR’s forecasts.
European Stocks Trade Mixed
European equity markets showed limited movement during the early session.
Germany’s DAX fell 0.09%, while France’s CAC 40 increased 0.04%.
The FTSE 100 gained 0.12%, with investors weighing the UK borrowing figures against company-specific developments and international market conditions.
Sterling was unchanged against the US dollar at $1.3367 at the time of the report.
Middle East Developments Remain in Focus
Investors continued to monitor diplomatic developments surrounding Iran as representatives gathered in New York for the United Nations General Assembly.
Iranian Foreign Minister Abbas Araghchi criticised international institutions ahead of potential discussions with US officials.
US envoy Mike Waltz indicated that Washington remained open to negotiations with Iran, subject to conditions concerning its participation.
Iranian President Masoud Pezeshkian also referred to previous agreements that, he said, had not been honoured.
Separately, G7 foreign ministers called on Iran to end military support for Houthi forces in Yemen, warning about the potential for further regional escalation.
French President Emmanuel Macron said that discussions with US President Donald Trump had included efforts to reduce tensions in energy markets and maintain freedom of navigation through the Strait of Hormuz.
The diplomatic developments remained relevant to energy markets because of concerns about potential disruption to oil shipments through the region.
Oil Prices Rise While Gold Declines
Oil prices advanced during the session amid continuing uncertainty surrounding Middle East developments.
Brent crude increased 1.4% to $101.62 a barrel, while West Texas Intermediate (WTI) rose 1% to $93.27.
Precious metals moved lower, with gold futures declining 0.64% to $4,355.67 an ounce.
Spot gold fell 0.55% to $4,320.35 an ounce.
The movements came as investors assessed geopolitical developments alongside the latest economic data.
UK Company News
M&C Saatchi Reports Decline in Operating Profit
M&C Saatchi (LSE:SAA) reported a 31.7% decline in first-half operating profit.
The advertising group recorded a statutory pre-tax loss, reflecting restructuring costs and weaker revenue from its Middle East operations.
Smiths Group Operating Profit Exceeds Forecasts
Smiths Group (LSE:SMIN) reported full-year operating profit ahead of analyst expectations.
The industrial engineering company also announced that it had launched a process to divest a legacy US asbestos liability associated with its John Crane business.
The proposed disposal has not yet been completed.
Kingfisher Upgrades Full-Year Guidance
Kingfisher (LSE:KGF) raised its full-year guidance following its interim results.
Growth at Screwfix and in Poland and Iberia supported the home improvement retailer’s performance, although B&Q and Brico Dépôt France reported lower sales.
The company also reported improved profitability and cash generation during the first half.
Market Outlook
UK investors are assessing the implications of higher-than-forecast government borrowing ahead of the Budget, alongside developments in international energy markets.
The FTSE 100 recorded a modest gain in early trading, while European indices were mixed.
Corporate earnings remain another focus, with updates from Kingfisher, Smiths Group and M&C Saatchi highlighting differing trading conditions across the retail, industrial engineering and advertising sectors.
Oil prices and further diplomatic developments in the Middle East could also influence market movements during the session.
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