ADVFN UK Market News

Author: Fiona Craig

  • Citi raises Rolls-Royce price target by 50% as data centre demand boosts outlook

    Citi raises Rolls-Royce price target by 50% as data centre demand boosts outlook

    Citigroup has increased its price target for Rolls-Royce Holdings (LSE:RR.) by around 50%, raising it to 1,647 pence from 1,101 pence after stronger first-half results prompted substantial upgrades to the bank’s long-term profit and cash flow forecasts.

    Citi lifted its longer-term earnings and cash generation estimates by between 30% and 40%, with accelerating demand from data centre customers emerging as a major growth driver for Rolls-Royce’s Power Systems business.

    Despite the higher valuation, the bank retained its “neutral” recommendation. With Rolls-Royce shares trading at £15.25, Citi’s new target implies an expected total return of 8.6%, below the 15% required by the broker to justify a “buy” rating.

    Power Systems overtakes Civil Aerospace in Citi valuation

    One of the most significant changes to Citi’s investment case is the growing importance of Power Systems.

    The division has now overtaken Civil Aerospace as the largest contributor to the broker’s fair-value assessment. Citi’s sensitivity analysis assigns 504 pence per share of value to Power Systems, compared with 353 pence for Civil Aerospace.

    Strong demand from data centre operators is underpinning the division’s growth outlook. Citi now forecasts a long-term Power Systems margin of 23.5%, considerably above Rolls-Royce’s own medium-term target range of 18% to 20%.

    The bank increased forecasts across all three of Rolls-Royce’s main divisions, although it applied different assumptions regarding the sustainability of recent improvements.

    Citi cautious on Civil Aerospace profit boosts

    For Civil Aerospace, Citi’s upgraded estimates incorporate contract catch-ups that contributed a net £497 million during the first half, together with £125 million of releases from onerous contract provisions.

    However, the bank cautioned that much of this benefit was non-recurring and non-cash.

    Over the longer term, Citi expects annual contract catch-ups to settle at approximately £100 million, substantially below the level recorded during the first half.

    Defence margins expected to normalise

    Rolls-Royce’s Defence division achieved a record margin of 21% in the first half, comfortably exceeding the company’s medium-term target of between 14% and 16%.

    The performance was supported by a favourable sales mix, including strong international business and higher aftermarket activity.

    Citi does not expect the 21% margin to be sustainable over the longer term, instead forecasting Defence margins of approximately 16% to 16.5%.

    Small Modular Reactor business adds further value

    Citi separately values Rolls-Royce’s Small Modular Reactor operation at between 87 and 90 pence per share.

    The broker used two approaches to estimate the business’s potential value. One assumes Rolls-Royce eventually scales production to eight SMR deliveries annually, while the other models the company capturing a 25% share of a global market potentially reaching 400 units by 2050.

    Citi adds the resulting SMR valuation to enterprise value when calculating its overall equity price target for Rolls-Royce.

    Citi forecasts £5.69 billion of shareholder free cash flow by 2028

    The broker’s discounted cash flow model assumes compound annual profit growth of 12.2% over the next five years, followed by 8% growth between years six and 10 and a perpetual growth rate of 3%.

    Its valuation also incorporates operating cash conversion of 110% and a weighted average cost of capital of 9%.

    Citi expects Rolls-Royce group sales to reach £22.99 billion in 2026 before increasing to £28.62 billion by 2028.

    Free cash flow available to shareholders is forecast to climb to £5.69 billion in 2028, reflecting the broker’s substantially more optimistic view of the group’s long-term earnings and cash-generation potential.

  • U.S. stocks set for cautious open as Fed relief clashes with oil-price concerns: Dow Jones, S&P, Nasdaq, Wall Street Futures

    U.S. stocks set for cautious open as Fed relief clashes with oil-price concerns: Dow Jones, S&P, Nasdaq, Wall Street Futures

    U.S. stocks could begin Monday’s session with limited direction, with major index futures pointing to a broadly flat open following Friday’s modest retreat.

    Technology shares may provide some support after Bloomberg reported that Anthropic (NASDAQ:ANTP) told prospective investors its second-quarter revenue increased by at least 14 times compared with the same period last year.

    Documents reviewed by Bloomberg reportedly showed preliminary quarterly revenue exceeding $11.5 billion for the Claude chatbot developer, compared with $787 million in the second quarter of 2025.

    Market direction clouded by economic and geopolitical risks

    Broader trading activity could remain subdued as investors weigh conflicting signals surrounding the near-term outlook.

    Recent U.S. economic figures have reduced expectations that the Federal Reserve will raise interest rates next month. However, persistently elevated crude prices continue to present an inflationary and economic risk as the U.S.-Iran conflict remains unresolved.

    U.S. crude futures climbed 0.7% to $83 a barrel after President Donald Trump threatened to bomb Oman during an interview with Fox News.

    The comments came as Iran and Oman appeared to be making progress towards an understanding over the management of the Strait of Hormuz, a critical route for global energy supplies.

    Wall Street retreats from record territory

    U.S. equities finished modestly lower on Friday after advancing during most of the previous two sessions, although selling pressure remained relatively contained.

    The Dow Jones Industrial Average declined 107.58 points, or 0.2%, to 53,732.41. The Nasdaq dropped 73.86 points, or 0.3%, to 26,729.16, while the S&P 500 fell 13.23 points, or 0.2%, to 7,785.76.

    Performance across the week was mixed. The Dow lost 0.6%, while the Nasdaq gained 0.1% and the S&P 500 advanced 0.4%.

    Friday’s decline may have partly reflected profit-taking after the S&P 500 climbed above 7,800 to reach a record intraday level on Thursday.

    The benchmark also recorded an all-time closing high that day, while the technology-heavy Nasdaq finished at its strongest closing level in more than two months.

    Consumer sentiment and retail sales disappoint

    Investors also reacted to signs of weakening U.S. consumer conditions.

    The University of Michigan’s consumer sentiment index dropped sharply to 51.0 in August from 55.2 in July. Economists had expected a more modest decline to 54.2.

    Separate Commerce Department figures showed retail sales unexpectedly contracted 0.6% in July following a 0.2% increase in June. Economists had forecast growth of 0.1%.

    The July decline represented the first fall in retail sales since a 0.2% contraction in October 2025.

    Although the weaker economic figures have further reduced concerns about an imminent Federal Reserve rate increase, they have also raised questions about the resilience of the U.S. economy, particularly with elevated energy prices adding pressure on consumers and businesses.

    Oil and gold stocks outperform broader market

    Crude prices rebounded on Friday after Trump administration officials indicated that economic measures could be used to pressure Iran into reopening the Strait of Hormuz, increasing concerns that the dispute could remain unresolved for an extended period.

    Energy-related stocks benefited from the move. The Philadelphia Oil Service Index climbed 2.6%, reaching its strongest closing level in well over two months.

    Gold producers also rallied as bullion prices increased, sending the NYSE Arca Gold Bugs Index up 2.2%.

    Computer hardware shares recorded notable gains as well, while airlines, software companies and pharmaceutical stocks were among the weaker areas of the market.

    Investors heading into Monday’s session therefore face a mixed backdrop, with softer economic data reducing expectations for higher interest rates while simultaneously raising concerns about growth, and continuing geopolitical tensions keeping energy prices elevated.

  • European stocks edge lower as weak Chinese data weighs on sentiment: DAX, CAC, FTSE100

    European stocks edge lower as weak Chinese data weighs on sentiment: DAX, CAC, FTSE100

    European equities moved modestly lower on Monday as a series of disappointing economic indicators from China renewed concerns about the outlook for the world’s second-largest economy.

    Chinese consumer spending stagnated in July, while urban investment contracted at a faster rate and unemployment increased. The latest figures have added to expectations that Beijing may need to introduce further measures to support economic activity during the second half of the year.

    Iran conflict and Hormuz risks remain in focus

    Investors were also monitoring the lack of progress towards ending the U.S.-Iran war, with geopolitical tensions continuing to influence energy markets.

    Brent crude futures traded around $89 a barrel as renewed fighting in Lebanon and further attacks on tankers in the Strait of Hormuz reduced hopes of an imminent resolution to the conflict.

    Against this backdrop, France’s CAC 40 Index declined 0.4%, while the U.K.’s FTSE 100 Index and Germany’s DAX Index each slipped 0.1%.

    Mining stocks gain as U.S. dollar weakens

    Mining companies were among the stronger performers, with Antofagasta (LSE:ANTO), Glencore (LSE:GLEN) and Anglo American (LSE:AAL) moving higher.

    The gains came as the U.S. dollar approached two-month lows following softer retail sales and consumer sentiment figures released on Friday.

    A weaker dollar can provide support for dollar-denominated commodities, potentially benefiting shares of major mining groups.

    AstraZeneca rises on positive Phase III results

    In company news, HIAG Immobilien Holding (LSE:0QU6) advanced after the Swiss property company reported a sharp increase in first-half profit.

    AstraZeneca (LSE:AZN) also climbed after the British pharmaceutical group announced positive results from its Phase III SAFFRON trial.

    Optima Health (LSE:OPT), meanwhile, fell sharply after the workplace health and wellbeing services provider reported a substantial increase in debt alongside its full-year results.

  • Gold holds near $4,400 as Fed expectations and geopolitical risks pull in opposite directions

    Gold holds near $4,400 as Fed expectations and geopolitical risks pull in opposite directions

    Gold remained firmly supported near $4,400 an ounce on Monday as investors balanced softer U.S. economic data and a weaker dollar against persistent inflation risks stemming from disruption to Middle East energy supplies.

    At 01:04 ET (05:04 GMT), XAU/USD was 0.5% higher at $4,399.44 an ounce. Gold Futures rose 0.4% to $4,455.90, while other precious metals recorded stronger gains. XAG/USD climbed 1.7% to $65.83 and XPT/USD advanced 1.8% to $1,749.15 an ounce.

    Meanwhile, the US Dollar Index declined 0.2% to 99.49, providing a more favourable backdrop for dollar-denominated bullion.

    Cooling U.S. economy changes the rate outlook

    Bullion entered Monday’s session with momentum after gaining almost 1% over the previous week, as signs of weaker U.S. economic activity reduced concerns that the Federal Reserve could raise interest rates in the near term.

    Consumer sentiment declined for the first time in three months, while retail sales suffered their largest monthly drop in more than a year.

    Those figures have given policymakers less reason to tighten monetary conditions immediately. Lower expectations for interest rates can benefit gold because the metal offers no yield and faces greater competition from interest-bearing assets when borrowing costs rise.

    ANZ analysts said the negative correlation between bullion and U.S. Treasury yields has also become more pronounced, leaving gold increasingly sensitive to movements in borrowing costs.

    The brokerage sees three potential stages for the gold market over the next year. Initially, persistent inflation and a Federal Reserve remaining on hold could constrain prices. An energy-driven economic slowdown could then change the macroeconomic environment before eventual monetary easing provides a stronger catalyst for bullion.

    ANZ expects geopolitical deterioration to continue encouraging central banks to diversify their reserves and forecasts gold could reach $5,200 an ounce by year-end.

    The next important monetary-policy signal is due on Wednesday with the release of minutes from the Federal Reserve’s July meeting.

    Middle East energy uncertainty complicates the inflation picture

    While recent U.S. indicators have softened, geopolitical developments mean inflation concerns have not disappeared.

    Several ships were attacked in the Strait of Hormuz late last week, and the U.S. said it was preparing additional measures designed to increase pressure on Iran’s economy.

    Vessels have continued to leave the waterway despite the security risks, with some reportedly turning off satellite transponders in an effort to make themselves more difficult to detect.

    At the diplomatic level, Iran and Oman appear to be moving closer to an arrangement governing the management of the Strait of Hormuz. The United States, however, is not involved in those negotiations.

    The uncertain combination of security incidents and diplomatic efforts leaves the outlook for global energy flows highly volatile.

    Another substantial rise in oil prices could revive inflationary pressure, potentially limiting the Federal Reserve’s room to ease monetary policy even if economic growth continues to weaken.

    China and other central banks underpin bullion demand

    Beyond monetary policy and geopolitical uncertainty, structural demand from central banks continues to provide an important source of support for gold.

    Bullion’s recovery above $4,000 an ounce has coincided with stronger investor interest and sustained official-sector purchases, with China remaining a notable buyer.

    Gold moved above its 100-day moving average last week for the first time since April and has remained close to the technical benchmark.

    ANZ said global central banks accumulated 244 tonnes of gold during the first quarter of 2026, representing the strongest quarterly purchasing total since the final three months of 2024.

    China added 8 tonnes to its holdings in April alone, marking its largest monthly gold purchase since December 2024.

  • Crude holds firm as Middle East supply threats outweigh softer demand outlook

    Crude holds firm as Middle East supply threats outweigh softer demand outlook

    Oil markets were broadly steady on Monday, consolidating last week’s strong advance as investors continued to weigh mounting supply risks across West Asia against forecasts pointing to slower global demand growth.

    Brent oil futures added 0.1% to $88.62 a barrel by 00:42 ET (04:42 GMT), while West Texas Intermediate crude futures edged 0.1% lower to $81.37 a barrel.

    The limited moves followed a particularly strong week for Brent, which climbed more than 5% as worsening U.S.-Iran tensions increased concerns about the security of regional energy infrastructure and shipping routes.

    Strait of Hormuz disruption keeps supply premium elevated

    Iran’s attacks on tankers have contributed to another slowdown in vessel movements through the Strait of Hormuz, while the U.S. naval blockade against Tehran remains in place.

    Diplomatic prospects also showed little sign of improving over the weekend. Iran Foreign Minister Abbas Araqchi reiterated that Tehran was not holding direct negotiations with Washington, while the U.S. threatened further economic measures against the country.

    Risks to regional shipping have also spread beyond the Persian Gulf. Yemen’s Iran-backed Houthis continued attacks against vessels around the Bab al-Mandab strait, bringing renewed uncertainty to another strategically important route for international energy flows.

    The threat of further supply disruption has so far outweighed increasingly cautious forecasts for oil consumption.

    Both the Organization of Petroleum Exporting Countries and the International Energy Agency lowered their respective forecasts for global oil demand in 2026 last week, but those revisions have done little to offset the geopolitical premium embedded in crude prices.

    Refined products face greater strain than crude

    The effects of the conflict are becoming particularly visible in refined fuel markets, according to ANZ analysts.

    Diesel has “emerged as the tightest segment of the petroleum complex,” the analysts said, reflecting the combined impact of refinery outages, supply interruptions and constraints on maritime transportation.

    Refinery disruption across the Persian Gulf has reduced diesel production and limited export availability even as worldwide demand for the fuel remains resilient.

    That imbalance means the refined products market is experiencing more severe supply pressure than crude itself.

    Russia-Ukraine conflict adds to diesel supply concerns

    The continuing war between Russia and Ukraine represents another source of pressure for global fuel markets.

    Kyiv has carried out additional attacks against Russian oil infrastructure, adding to existing concerns about the availability of refined products at a time when Persian Gulf production is already being disrupted.

    The combination of constrained refinery operations, disrupted shipping routes and continued geopolitical instability suggests diesel supplies could tighten further in the coming months.

    For crude markets, these risks continue to provide underlying support even as major energy organisations become less optimistic about the trajectory of global oil demand during 2026.

  • Wall Street looks to retail earnings as softer data reshapes Fed rate outlook: Dow Jones, S&P, Nasdaq, Futures

    Wall Street looks to retail earnings as softer data reshapes Fed rate outlook: Dow Jones, S&P, Nasdaq, Futures

    Investors entered the new week with expectations for an imminent Federal Reserve rate increase fading, leaving U.S. stock futures mixed as attention shifts towards major retail earnings and another round of economic indicators.

    Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) are among the prominent retailers due to report in the coming days, potentially providing fresh evidence about the health of U.S. consumer spending.

    Away from Wall Street earnings, investors are assessing reports that Anthropic (NASDAQ:ANTP) could generate as much as $200 billion in annual revenue by 2028 as the artificial intelligence company considers a potential IPO. Geopolitical risk also remains prominent after commercial shipping through the Strait of Hormuz slowed dramatically over the weekend.

    Fed tightening expectations retreat

    U.S. futures showed no clear direction early Monday. At 03:08 ET (07:08 GMT), Dow futures had fallen 26 points, or 0.1%, while S&P 500 futures were 15 points, or 0.2%, higher. Nasdaq 100 futures gained 160 points, equivalent to 0.5%.

    The moves followed declines for the major Wall Street averages in the previous session, when unexpectedly weak U.S. retail sales added to evidence of cooling economic conditions.

    Applied Materials (NASDAQ:AMAT) contributed to the pressure after an optimistic outlook still fell short of demanding investor expectations. Its shares dropped more than 5%, with the disappointment spilling over into other stocks associated with the artificial intelligence investment cycle.

    Deutsche Bank analysts identified signs that markets could be entering a summer lull, noting that the VIX volatility index fell to a 2026 low on Friday. They nevertheless highlighted “challenging August crosswinds playing out in bond markets.”

    “Expectations for an imminent Fed rate hike have been pulled back, but this has been accompanied by a significant U.S. curve steepening, with the backdrop of higher oil prices, elevated fiscal deficits, and demand for capital from the AI investment boom putting upward pressure on yields,” the analysts wrote.

    Bond investors will receive further signals this week from the minutes of the Federal Reserve’s July policy meeting and preliminary August business activity data.

    Corporate results could prove equally important for equities. Alongside Home Depot, investors are preparing for earnings from Target, Lowe’s and Walmart as they assess whether U.S. households are becoming more cautious with their spending.

    Anthropic’s potential IPO faces ambitious growth assumptions

    Anthropic (NASDAQ:ANTP) expects annual revenue to reach approximately $190 billion to $200 billion by 2028, Reuters reported, citing people familiar with the AI developer’s finances.

    Those projections are attracting attention as bankers and investors attempt to determine an appropriate valuation ahead of a possible initial public offering.

    The forecast is more than four times Anthropic’s $47 billion revenue run rate disclosed in May, meaning any valuation based on the projection would incorporate substantial expectations for continued expansion.

    According to Reuters, bankers and investors are using enterprise value-to-revenue multiples based on financial forecasts extending two years into the future.

    Revenue multiples are frequently applied to rapidly growing software companies before their profitability reaches maturity. Looking two years ahead is less conventional, however, reflecting both Anthropic’s rapid expansion and the difficulty of valuing an AI developer facing enormous spending requirements for computing capacity, model development and talent.

    Strait of Hormuz traffic virtually stops

    Geopolitical tensions remain another important variable for global markets after commercial shipping activity through the Strait of Hormuz fell sharply during the weekend.

    Kpler data cited by Reuters showed only five commodity vessels transited the waterway on Saturday, followed by none on Sunday. The previous weekend had recorded 31 crossings.

    The slowdown followed attacks on three vessels operated by Abu Dhabi National Oil Company last week, which were reported by the United Arab Emirates.

    Prospects for an immediate diplomatic solution have also deteriorated after the U.S. suggested its naval blockade of Iranian ports could continue indefinitely.

    The scale of the disruption is particularly significant given the strait’s importance to global energy supplies. Before the U.S. and Israel launched their assault against Iran in late February, more than 130 vessels were crossing the route every day.

    Brent crude futures were last 0.1% lower at $88.45 a barrel.

    Chinese factories feel pressure from weaker domestic demand

    China delivered another softer economic signal on Monday as industrial production growth slowed to 4.5% year-on-year in July.

    The figure missed expectations for a 5% increase and represented a slowdown from June’s 5.3% growth rate, according to the National Bureau of Statistics.

    Domestic conditions remain challenging for manufacturers. China’s official manufacturing PMI slipped into contraction territory in July, while consumer demand continued to show limited momentum.

    Export demand remains a source of resilience, particularly for higher-technology Chinese goods, helping to cushion the broader slowdown in factory output.

    Producers are nevertheless facing additional pressure from higher costs caused by disruption across international energy and shipping markets.

    Nvidia could deepen AI infrastructure role with SB Energy investment

    Nvidia (NASDAQ:NVDA) is considering an investment of up to $3 billion in SB Energy, according to The Information, which cited people familiar with the discussions.

    The SoftBank Group-backed company is developing a planned data centre campus in Ohio for OpenAI, and Nvidia’s potential investment would further expand the chipmaker’s involvement in the infrastructure supporting the AI industry.

    Separate negotiations between Nvidia, OpenAI and SB Energy reportedly involve the possibility of around $100 billion in credit support from Nvidia for the Ohio project.

    Such an arrangement would illustrate how Nvidia’s role in the AI boom is expanding beyond supplying advanced processors and into financing the enormous computing infrastructure required to develop and operate artificial intelligence systems.

    No final agreement has been reached, and the terms under discussion could still change. Nvidia is scheduled to report its latest quarterly earnings next week.

  • Market Open: Defence Tech Fund, Gattaca Profit Growth

    Market Open: Defence Tech Fund, Gattaca Profit Growth

    FTSE 100 opens flat as Fed rate expectations support sentiment, while Defence Holdings invests £2m and Gattaca reports profit growth.

    Market Overview

    The FTSE 100 opened broadly unchanged at 10,749.95, down less than 0.01 per cent from its previous close, while the Euronext 100 gained 0.04 per cent to 1,970.69 and Germany’s DAX was 0.02 per cent higher at 26,446.72. European sentiment was supported by falling bond yields and expectations that the Federal Reserve may remain on hold after softer US retail sales data. Overnight on Wall Street, the Nasdaq closed lower at 26,729.16 and the S&P 500 declined to 7,785.76.

    Commodity trading was mixed, with copper and gold higher while Brent crude and natural gas moved lower. Oil markets remained sensitive to continuing tensions involving Iran following a strong week for prices. Against sterling, the US dollar and Japanese yen strengthened marginally, the Swiss franc weakened slightly, while the euro and Australian dollar were unchanged. Bitcoin rose against sterling.

    Market Numbers

    FTSE 100: Down (-0.001%), 10,749.95
    Euronext 100: Up (+0.04%), 1,970.69
    DAX: Up (+0.02%), 26,446.72
    NASDAQ: Down, 26,729.16
    S&P 500: Down, 7,785.76

    In the Headlines

    Defence investment – Defence Holdings (LSE:ALRT)
    Defence Holdings has committed £2 million to a new UK defence technology fund. The investment increases the company’s exposure to emerging defence technologies as the sector attracts greater strategic attention.

    Contract hiring – Gattaca (LSE:GATC)
    Gattaca reported growth in profit and net fee income for FY26, supported by contract hiring. The performance highlights the importance of its contract recruitment operations in driving earnings growth.

    Currencies (vs GBP)

    USD: Up (+0.00%), $1.3546
    CHF: Down (-0.00%), Fr.1.1009
    EUR: Unchanged (0.00%), €1.1704
    JPY: Up (+0.01%), ¥215.684
    AUD: Unchanged (0.00%), $1.9119
    Bitcoin (BTC/GBP): Up, £46,806.15

    Commodities

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

  • European gas extends rally as Hormuz disruption deepens supply concerns

    European gas extends rally as Hormuz disruption deepens supply concerns

    European natural gas prices climbed for a fourth consecutive session on Monday, reaching their highest levels in several weeks as escalating tensions around the Strait of Hormuz combined with unusually low storage inventories to intensify concerns over supplies heading into autumn.

    Benchmark Dutch front-month futures rose 1.83% to €62.55 per megawatt-hour, touching their strongest level since July 24. British wholesale contracts recorded an even larger advance, rising more than 2% to 154.01 pence per therm and also reaching their highest intraday level since July 24.

    The gains marked a fourth straight positive session for both benchmarks, their longest consecutive daily advance since late July.

    Hormuz tensions add geopolitical premium

    The latest move follows an escalation in U.S. diplomatic and military rhetoric towards Tehran ahead of the weekend.

    Energy traders have increased the geopolitical risk premium embedded in European gas prices after Washington warned that it could impose a complete naval blockade on Iranian ports if restrictions on commercial shipping through the Strait of Hormuz continue.

    The prospect of stronger naval enforcement has further reduced expectations that an agreement restoring normal maritime traffic can be reached quickly.

    Disruption through the waterway has left LNG tankers originating from Qatar stranded and delayed spot cargoes that would otherwise be heading towards European import terminals.

    European utilities are simultaneously competing with Asian buyers for available LNG supplies. Asian importers have been bidding aggressively for uncommitted cargoes, increasing the challenge for European companies seeking replacement volumes on the global spot market.

    Low storage levels increase Europe’s exposure

    Supply concerns are being amplified by a significant deficit in European gas inventories.

    Figures from Gas Infrastructure Europe show that underground storage facilities across the European Union are only 59% full, an unusually low level for the middle of August.

    Intense summer heatwaves have contributed to the shortfall by increasing the amount of gas burned by utilities to meet cooling-related electricity demand. Delays to LNG imports have further restricted the pace at which inventories can be replenished ahead of the winter heating season.

    Market pricing is also making storage injections less attractive. Immediate gas supplies are commanding a substantial premium, leaving the forward curve deeply backwardated.

    That structure reduces the economic incentive for traders to purchase expensive spot gas today and store it for delivery later, potentially making it more difficult to rebuild inventories before colder weather arrives.

    Energy markets remain focused on supply risks

    With relatively few European economic releases scheduled at the beginning of the week, gas traders are looking primarily to geopolitical developments and movements in wider energy and commodity markets for direction.

    Broader financial markets received some relief from softer U.S. inflation indicators last week, which strengthened expectations for a more dovish Federal Reserve stance.

    European gas markets face a different set of pressures, however. Energy analysts continue to see limited scope for a sustained decline in prices while shipping through the Strait of Hormuz remains disrupted and European storage inventories remain significantly below normal seasonal levels.

  • European stocks rise as lower yields and Fed pause expectations support sentiment: DAX, CAC, FTSE100

    European stocks rise as lower yields and Fed pause expectations support sentiment: DAX, CAC, FTSE100

    European equities moved modestly higher at the start of the week as declining government bond yields and a weaker U.S. dollar improved risk appetite, with investors increasingly expecting the Federal Reserve to keep interest rates unchanged at its September meeting.

    The pan-European Stoxx Europe 600 Index gained 0.2%, recovering some ground after ending a four-week winning streak on Friday. Among the major regional markets, Germany’s DAX advanced 0.2%, France’s CAC 40 was broadly unchanged and London’s FTSE 100 climbed 0.4%.

    European sovereign bond yields retreated from the multi-week highs reached recently, providing some relief to equity markets. The move was particularly supportive for growth-oriented sectors, which tend to be more sensitive to changes in borrowing costs and discount rates.

    At the same time, the U.S. dollar weakened against major currencies as investors reduced expectations for further near-term Federal Reserve tightening.

    Weak U.S. data pushes Fed pause probability towards 70%

    Money markets are now pricing in approximately a 70% chance that the Federal Reserve will leave its benchmark interest rate unchanged at its September policy meeting.

    Expectations have shifted following a series of softer U.S. economic releases that have weakened the argument for additional monetary tightening in the near term.

    Investors have recently digested several important data points, including a weaker-than-expected July employment report showing a contraction in payrolls, Consumer Price Index figures that met expectations, a flat Producer Price Index reading and an unexpected 0.6% month-on-month decline in July retail sales.

    Taken together, the figures have reduced concerns that inflationary pressures will require an immediate policy response. That has encouraged expectations that the Federal Reserve can maintain its current policy stance for longer while assessing the direction of the U.S. economy.

    For equity markets, the possibility of an extended pause has provided support by reducing fears of another increase in borrowing costs.

    Sparse European calendar keeps global risks in focus

    Europe’s economic calendar is unusually quiet this week, leaving regional equity markets more dependent on developments in the global economy, bond markets, currencies and commodities for direction.

    Several risks that influenced trading throughout August nevertheless remain unresolved.

    One of the most significant is the continuing disruption to shipping through the Strait of Hormuz. Diplomatic negotiations between Washington and Tehran over commercial transit remain deadlocked, keeping crude oil prices elevated and maintaining pressure on input costs for energy-intensive European companies.

    European equities have already enjoyed a strong summer rally that brought several benchmarks close to record highs. As a result, strategists remain divided over whether equity risk premiums have become too compressed relative to persistently high real borrowing costs.

    The second-quarter earnings season is also largely complete. The succession of better-than-expected corporate results that supported European stocks through late July has therefore faded, leaving macroeconomic developments as a more important driver of market direction.

    Markets turn to U.S. PMIs and Jackson Hole

    Attention is now shifting towards upcoming U.S. economic indicators that could provide the next significant catalyst for global markets.

    S&P Global’s preliminary August Purchasing Managers’ Index readings for U.S. manufacturing and services are due later this week. They will be followed by the Federal Reserve’s annual Jackson Hole Symposium the following week.

    Investors will examine the data for evidence that economic activity is cooling at a controlled pace. A gradual slowdown would strengthen expectations for a soft landing while supporting the case for the Federal Reserve to keep rates unchanged.

    Markets will also be watching closely for any signs that inflationary pressures are rebuilding, which could challenge the increasingly widespread expectation of an extended policy pause.

  • FTSE 100 rises as weak U.S. retail sales ease Fed tightening concerns

    FTSE 100 rises as weak U.S. retail sales ease Fed tightening concerns

    UK equities moved higher on Monday as weaker-than-expected U.S. retail sales reduced expectations for further near-term monetary tightening by the Federal Reserve, allowing London’s blue-chip index to recover some ground after falling 1.4% last week.

    The FTSE 100 gained 0.26% as of 03:25 ET (07:25 GMT). Elsewhere in Europe, Germany’s DAX slipped 0.03%, while France’s CAC 40 edged 0.05% lower. Sterling strengthened 0.22% against the dollar to $1.3562.

    Sentiment received support from U.S. retail sales data showing a 0.6% month-on-month decline in July. Economists had expected an increase of 0.1%, while the contraction was the steepest monthly fall since May 2025.

    The disappointing figures pushed U.S. Treasury yields and the dollar lower on Friday as investors scaled back expectations for tighter Federal Reserve policy, providing a more supportive backdrop for equities at the beginning of the new week.

    U.S.-Iran tensions keep Hormuz risks in focus

    Geopolitical uncertainty remained a significant consideration for markets. Speaking at Market Regulation Headquarters on Sunday evening, Iran’s vice president said Tehran would be successful in its “economic warfare” as Washington prepared to announce another round of sanctions this week.

    Shipping activity through the Strait of Hormuz remained severely restricted. Ship-tracking company Kpler recorded no commodity vessel crossings on Sunday and only five on Saturday, compared with 31 during the previous weekend.

    The 60-day memorandum of understanding between the U.S. and Iran, agreed in June to halt hostilities, expired on Monday without discussions taking place over an extension. Tehran has maintained that Washington must first meet its obligations under the original agreement.

    Regional security arrangements have also moved into focus. Saudi Arabia, Turkiye and Pakistan signed the Mecca Joint Defence Agreement on Aug. 7, establishing collective-defence provisions. Washington welcomed the agreement, while Turkish President Erdogan said the pact had “sent an important message to the world” and described Egyptian participation as “possible.”

    Jefferies analysts said on Monday that they saw no simple route towards resolving the confrontation, characterising the current situation as “no war and no peace” while the Strait of Hormuz remains closed.

    “The only possibility remains a fudge or look the other way arrangement by which some traffic can start to flow through the Strait while the US and Iran try to negotiate a deal,” strategist Mohit Kumar wrote in a morning note.

    Jefferies said the fragile truce could potentially survive until the U.S. mid-term elections before the threat of renewed escalation increases. From a market perspective, the broker said a crucial question is how far oil prices could rise before Washington becomes willing to make concessions.

    The firm also noted that Europe and Asia are more vulnerable than the United States to an extended disruption in the Strait because of their greater dependence on imported energy supplies.

    UK housing market remains under pressure

    Domestic housing figures added to the cautious UK economic backdrop. Asking prices fell 2% month-on-month in August to an average of £364,999, according to a media report citing Rightmove data.

    The decline was the largest recorded for August since 2018. Prices were also 1% lower year-on-year, representing the steepest annual decline since December 2023, while the number of homes available for sale reached a 12-year seasonal high.

    Rightmove lowered its forecast for house prices across the whole of 2026 to a range of 0% to minus 2%, compared with its previous expectation for growth of 2%.

    “The mini Burnham bounce and some renewed general optimism have brought a degree of improvement,” Rightmove’s Colleen Babcock was quoted as saying, “but whether that develops into a more sustained recovery will likely depend on confidence, mortgage rates and the new chancellor’s first budget this Autumn.”

    Oil slips while gold moves higher

    Energy prices edged lower as investors continued to assess the geopolitical outlook. Brent crude fell 0.30% to $88.26 a barrel, while WTI declined 0.70% to $80.90.

    Precious metals moved in the opposite direction. Gold futures advanced 0.36% to $4,453.35 an ounce, while spot gold gained 0.46% to $4,397.18.

    UK round up

    AstraZeneca (LSE:AZN) discontinued its Phase III eVOLVE-Lung02 study after an independent review concluded that the combination of volrustomig and chemotherapy was unlikely to achieve its progression-free survival or overall survival endpoints when compared with pembrolizumab plus chemotherapy.

    The trial enrolled 895 patients and identified no new safety signals. AstraZeneca said its other Phase III studies evaluating volrustomig will continue as planned.