Author: Fiona Craig

Markets prepare for a crucial week of corporate results

US stock index futures moved higher on Tuesday as investors looked ahead to a wave of earnings from leading technology companies while continuing to monitor developments in the Middle East and the outlook for artificial intelligence investment.

As of 02:49 ET (06:49 GMT), Dow Jones futures were up 170 points, or 0.3%, S&P 500 futures had gained 39 points, or 0.5%, and Nasdaq 100 futures climbed 359 points, or 1.3%.

The gains followed a weaker session on Wall Street, where concerns over the long-term sustainability of AI spending weighed on sentiment. Semiconductor stocks tied to artificial intelligence surrendered much of their earlier rally, with the sector finishing only 0.6% higher after posting gains of more than 3% during the session.

Markets were also digesting increased competition from emerging Chinese AI developers, adding another layer of uncertainty to the sector.

Meanwhile, President Donald Trump signed executive orders introducing a 50% tariff on a wide range of Canadian imports, including paper products, plywood and hockey sticks. The new duties are due to take effect within 30 days.

Geopolitical uncertainty keeps investors cautious

Risk appetite remained restrained after Yemen’s Iran-backed Houthi movement threatened to block Saudi shipping, raising concerns that the regional conflict could spread further and disrupt global energy supplies.

The warning came as military exchanges between Washington and Tehran entered a tenth consecutive day despite continuing diplomatic contacts aimed at reducing tensions.

Investors also remained focused on the Strait of Hormuz and the Bab al-Mandab Strait, two critical maritime routes whose disruption could have significant implications for global oil and liquefied natural gas exports.

Oil holds above pre-war levels

Crude prices eased slightly but continued to trade well above the levels seen before the conflict escalated.

Brent crude slipped 0.1% to $89.17 per barrel, while US West Texas Intermediate gained 0.2% to $83.40.

Before hostilities intensified in late February, Brent had been trading close to $70 per barrel. Renewed geopolitical instability has kept prices elevated despite earlier ceasefire efforts.

Higher energy costs continue to raise concerns that inflation could remain stubborn, potentially influencing future monetary policy decisions.

Earnings season gathers pace

Investors are awaiting results from Charles Schwab (NYSE:SCHW), Danaher (NYSE:DHR), 3M (NYSE:MMM), Northrop Grumman (NYSE:NOC) and General Motors (NYSE:GM) before US markets open.

After the closing bell, Interactive Brokers, Chubb and Capital One are also due to report.

In Europe, Novartis (NYSE:NVS) exceeded expectations for second-quarter core operating profit as cost controls offset softer sales of Entresto. The company’s shares rose more than 1% in early trading.

Attention will quickly turn to Alphabet (NASDAQ:GOOG), Tesla (NASDAQ:TSLA) and Texas Instruments (NASDAQ:TXN), whose quarterly reports later this week are expected to provide important signals about the pace of AI-related investment.

Nvidia increases exposure to Nebius

Nvidia (NASDAQ:NVDA) disclosed a 9.3% ownership stake in AI cloud infrastructure company Nebius (NASDAQ:NBIS), following its previous $2 billion investment.

Regulatory filings showed the holding totals approximately 22.26 million shares, including shares associated with warrants that cannot be exercised before 11 September.

Nebius shares gained around 5% in after-hours trading.

Headquartered in Amsterdam, Nebius was created from the separation of Yandex and plans to build more than five gigawatts of AI computing capacity by 2030.

Defence sector gains after cabinet reshuffle

Shares in UK defence companies moved higher on Tuesday after newly appointed Prime Minister Andy Burnham named former defence secretary John Healey as the country’s new finance minister, prompting investors to reassess prospects for future military spending.

By 10:03 GMT, Babcock International (LSE:BAB) had advanced 6.4%, Qinetiq (LSE:QQ.) gained 3.8%, while BAE Systems (LSE:BA.) rose 3%.

Markets anticipate stronger defence investment

Healey left his role as defence secretary in June after criticising the previous administration over military funding, arguing that the then-prime minister had been “unable” and the Treasury “unwilling” to provide the resources necessary to safeguard the country.

According to Andrew Wishart, senior UK economist at Berenberg, Healey’s earlier resignation over defence spending “suggests that he will raise military expenditure,” although the question of how such increases would be financed “remains to be seen.”

Fiscal pressures remain a key challenge

Although Healey is regarded as a respected figure within the Labour Party, he now faces the difficult task of increasing funding for priorities such as defence while supporting economic growth, reducing welfare spending and remaining within the fiscal framework that Burnham has committed to maintaining.

While he was not widely expected to become finance minister, investors welcomed the appointment, citing his previous experience as a junior Treasury minister under Gordon Brown between 2002 and 2007, together with senior roles held under successive Labour leaders.

Earlier this month, Healey told the BBC that increased investment in defence could contribute to revitalising British industry and supporting a broader programme of reindustrialisation.

Sterling also strengthened modestly following his appointment after earlier weakness triggered by Burnham’s comments suggesting there could be some flexibility in the UK’s fiscal rules.

Canada expected to join GCAP programme

The new government is also expected to announce an important defence initiative on Tuesday by inviting Canada to participate in the Global Combat Air Programme (GCAP), the next-generation fighter aircraft project currently led by the United Kingdom, Italy and Japan.

The announcement is expected to coincide with the Farnborough International Airshow, one of the aerospace and defence industry’s leading annual events, where ongoing conflicts in Ukraine and the Middle East continue to drive demand for advanced military technologies, including combat drones, interceptor missile systems and artificial intelligence-enabled defence software.

Canada is expected to join the programme as an observer, becoming the first country outside the three founding partners to participate in the GCAP initiative.

Markets balance Middle East tensions with earnings and economic data

European equities posted modest gains on Tuesday as investors weighed renewed security concerns surrounding key Middle Eastern shipping routes against signs that diplomatic engagement between the United States and Iran remains active. Market participants also turned their attention to a busy week of corporate earnings and economic releases across Europe.

The pan-European STOXX 600 rose 0.2% in early trading. Germany’s DAX and France’s CAC 40 each advanced 0.2%, while Italy’s FTSE MIB outperformed with a 0.6% gain.

New maritime security concerns return to focus

Investor sentiment was tempered after Yemen’s Houthi movement announced plans to impose a fresh naval blockade targeting Saudi Arabia, reviving fears over the security of vital energy transport routes and the potential impact on global oil and shipping markets.

The latest development came even as reports suggested diplomatic contacts between Washington and Tehran remain ongoing following recent military confrontations. As a result, financial markets continue to weigh the possibility of easing geopolitical tensions against the growing risks facing maritime trade.

Earnings season and central bank outlook remain in focus

Corporate results also shaped early trading, with Swiss pharmaceutical company Novartis (NYSE:NVS) reporting second-quarter sales that exceeded market expectations.

Defensive sectors have attracted renewed investor interest as geopolitical uncertainty persists and attention shifts toward Thursday’s European Central Bank policy meeting, where markets will be watching closely for guidance on interest rates and the economic outlook.

Economic indicators expected to guide markets

Investors are also awaiting the latest Eurozone economic sentiment data, which could provide further insight into business confidence and the resilience of the regional economy.

In the United Kingdom, fresh wage growth figures are due shortly after newly appointed Prime Minister Andy Burnham entered office, offering policymakers and the Bank of England updated information on labour market conditions and inflation pressures.

London’s FTSE 100 traded 0.1% lower in early dealings.

Wall Street earnings remain important for European sentiment

Beyond Europe, investors are preparing for a series of earnings reports from major US technology companies, including Alphabet (NASDAQ:GOOG), Tesla (NASDAQ:TSLA) and Intel (NASDAQ:INTL), all scheduled to report later this week.

Although European equity markets have fewer mega-cap technology companies than their US counterparts, many industrial groups and semiconductor equipment manufacturers remain closely linked to American technology investment.

Any changes to capital spending plans for artificial intelligence or digital infrastructure announced by US technology leaders could have a significant impact on European technology shares.

Company movers

Among individual stocks, Mitie Group (LSE:MTO) surged 40% after agreeing to a takeover by OCS Group.

Meanwhile, Wienerberger (TG:WIB) declined 7% following the release of its latest quarterly results.

FTSE 100 opens flat as investors watch Middle East tensions. Marston’s and Wickes lead headlines while Brent crude eases and copper gains.

Market Overview

The FTSE 100 opened marginally lower, while European markets were mixed as the Euronext 100 edged higher and Germany’s DAX gained at the open. Overnight, US markets finished weaker, with the Nasdaq closing at 25,508.07 and the S&P 500 ending at 7,443.28 as investors monitored renewed security concerns in the Middle East, including shipping risks around the Strait of Hormuz and their potential impact on energy markets. The FTSE 100 opened 0.001 per cent lower, the Euronext 100 rose 0.04 per cent and the DAX gained 0.10 per cent.

Commodity markets remained in focus as geopolitical tensions continued to influence sentiment. Copper strengthened, while gold eased and Brent crude traded lower despite ongoing supply concerns. Natural gas edged higher. Against sterling, the US dollar and Swiss franc were little changed, the euro was steady, the Japanese yen and Australian dollar edged higher, while Bitcoin was higher.

Market Numbers

FTSE 100: Down (-0.001%), 10,524.25
Euronext 100: Up (+0.04%), 1,902.53
DAX: Up (+0.10%), 24,871.47
NASDAQ: Down, 25,508.07
S&P 500: Down, 7,443.28

In the Headlines

Trading update – Marston’s (LSE:MARS)
Marston’s said trading has been supported by stronger customer demand during the World Cup period and outlined plans to accelerate growth. The update suggests trading momentum has improved despite a challenging consumer backdrop, providing reassurance over the group’s outlook.

Retail update – Wickes (LSE:WIX)
Wickes reported second-quarter sales growth and maintained its full-year expectations. The update indicates continued resilience in consumer demand across its home improvement business despite ongoing economic uncertainty.

Currencies (vs GBP)

USD: Down (-0.00%), $1.3431
CHF: Down (-0.01%), Fr.1.0879
EUR: Unchanged (0.00%), €1.1765
JPY: Up (+0.00%), ¥218.244
AUD: Up (+0.01%), $1.9187
Bitcoin (BTC/GBP): Up, £49,235.60

Commodities

Copper: Up
Gold: Down
Brent Crude: Down
Natural Gas: Up

UK stocks edge lower amid renewed Middle East uncertainty

The FTSE 100 traded modestly lower on Tuesday as investors assessed reports of a proposed temporary ceasefire between the United States and Iran, while renewed attacks on commercial shipping in the Strait of Hormuz continued to fuel geopolitical uncertainty. Investors also digested stronger-than-expected UK labour market figures alongside an improvement in the government’s latest borrowing data.

The FTSE 100 slipped 0.18%, while Germany’s DAX traded broadly flat and France’s CAC 40 gained 0.05%. Sterling strengthened 0.07% against the US dollar to $1.3444.

Ceasefire proposal competes with escalating regional conflict

According to reports, Qatar, Egypt and Pakistan have put forward a proposal for a 10-day ceasefire between Washington and Tehran, aimed at reopening the Strait of Hormuz and creating an opportunity for broader discussions on maritime security.

However, uncertainty remained elevated after reports that Iran attacked a tanker in the Strait of Hormuz early on Tuesday, forcing the crew to abandon the vessel. The incident followed a tenth consecutive night of US airstrikes targeting Iran’s military capabilities linked to commercial shipping.

Separately, Yemen’s Houthi movement announced a blockade of Saudi Arabia through the Bab al-Mandeb Strait, while Iran’s president declared the country had entered “full-scale war.” Meanwhile, diplomatic efforts continued, with Iran’s interior minister travelling to Pakistan for mediation talks.

US President Donald Trump has yet to decide whether to support the proposed ceasefire or continue backing wider military operations alongside Israel, with officials suggesting the coming days will be critical.

Government announces energy tax cut

Domestically, newly appointed Prime Minister Andy Burnham announced that VAT on household electricity bills will be abolished from October 1, with the measure funded by cancelling the £1.8 billion Digital ID programme.

“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope,” Burnham said.

Chancellor John Healey added that the policy would “help bring down inflation while supporting households in every postcode.”

Government bond yields moved higher following the announcement.

UK labour market remains resilient

Fresh data from the Office for National Statistics showed the UK unemployment rate fell to 4.9% during the three months to May, outperforming forecasts of 5.0%.

Employment increased by 148,000 over the quarter, comfortably ahead of economists’ expectations for an 80,000 gain, while the employment rate rose to 75.1%.

Average weekly earnings increased by 4.3% year-on-year, slightly below the expected 4.5%, while regular pay excluding bonuses rose 3.4%, matching forecasts.

Private sector regular pay growth stood at 2.9%, compared with 5.5% in the public sector, while job vacancies declined by 7,000 to 712,000 during the second quarter.

Public borrowing declines in June

The UK’s public finances also showed improvement, with public sector borrowing falling to £16.0 billion in June, a reduction of £7.9 billion compared with the same month last year and marginally below official forecasts.

Borrowing for the financial year to date reached £57.6 billion, down £3.7 billion from a year earlier but still £2.7 billion above projections.

Public sector net debt stood at 94.9% of GDP at the end of June, up 0.4 percentage points year-on-year and remaining close to levels last seen in the early 1960s.

Commodities mixed as investors seek safety

Oil prices eased despite ongoing geopolitical tensions, with Brent crude falling around 0.4% to $88.87 per barrel, while US WTI crude remained broadly unchanged near $82.46.

Gold extended its rally as investors sought defensive assets, with futures climbing 1.6% to $4,078.52 an ounce and spot gold rising 1.7% to approximately $4,074.33.

UK companies in focus

Mitie Group (LSE:MTO) reported a 10% increase in first-quarter revenue, supported by contract wins, renewals and the acquisition of Marlowe. The company also agreed to a £3.1 billion takeover by OCS Group and suspended its £100 million share buyback programme.

MONY Group (LSE:MONY) posted record first-half revenue and reiterated its full-year earnings guidance, with growth across its Insurance, Money and Home Services divisions helping offset weaker Cashback performance. Ongoing cost efficiencies and increased use of automation and artificial intelligence continued to support profitability.

Compass Group (LSE:CPG) delivered 7.1% organic revenue growth during the third quarter as new business momentum accelerated into its target range. The catering group said it remains on course to achieve a fifth consecutive year of 4% to 5% net new business growth.

Wickes Group (LSE:WIX) reported higher second-quarter revenue, driven by increased customer volumes and market share gains despite continued pricing pressure. The home improvement retailer maintained its fiscal 2026 profit guidance, supported by growth in its TradePro membership programme and digital sales.