UK equities opened lower on Monday despite signs of easing tensions between the United States and Iran, while investors also digested fresh comments from the Bank of England and developments in UK politics. The FTSE 100 fell 0.20%, while Germany’s DAX rose 0.18% and France’s CAC 40 slipped 0.16%. Sterling strengthened 0.13% against the US dollar to 1.3220 as of 03:23 ET (07:23 GMT).
J.P. Morgan lifted its year-end target for the FTSE 100 to 11,000 from 10,300, implying around 5% upside from the index’s current level of 10,508.
Bank of England Chief Economist Huw Pill warned that policymakers must remain focused on bringing inflation back to target, following May’s Consumer Prices Index reading of 2.8%.
“I think it should be seen as problematic, because our mandate is very clear; inflation at 2% at all times,” Pill said, adding “I do fear a little bit that, because we saw inflation go to 11%, policy discussion becomes, ’oh inflation at 3% is not so bad’.”
Pill, who voted for a rate increase at the Bank’s most recent policy meeting, also suggested that monetary policy “hasn’t been restrictive enough over the last few years.”
Meanwhile, Labour leadership frontrunner Andy Burnham is expected to outline plans in Manchester for a wide-ranging devolution agenda centred on reindustrialisation, infrastructure investment, housing and greater decision-making powers for local authorities. The proposals are also expected to include reforms to public procurement aimed at supporting UK employment and measures to reduce youth unemployment.
Geopolitical tensions remained in focus after a US official said Washington and Tehran had agreed to “stand down for now” following renewed exchanges around the Strait of Hormuz over the weekend.
“Both sides will stand down for now and vessels can move freely,” the official said, adding that technical talks on the memorandum of understanding remain “on track.”
The announcement followed renewed military action after US Central Command carried out strikes against Iranian military targets, accusing Tehran of failing to honour the ceasefire following an attack on a tanker near the Omani coast. Iran responded with strikes against US military bases in Kuwait and Bahrain, claiming eight facilities had been targeted and warning that any further breach of the ceasefire “will lead to a complete halt of ongoing processes.”
US President Donald Trump also warned on Truth Social that the United States would “complete the job” if Iran failed to comply, adding that “the Islamic Republic of Iran will no longer exist” should hostilities continue.
Despite the temporary stand-down, uncertainty over shipping through the Strait of Hormuz remains unresolved. Iranian Foreign Minister Abbas Araghchi warned that attempts to bypass Iran’s preferred shipping route would “increase tensions”, while the Islamic Revolutionary Guard Corps said it would continue to oversee traffic through the waterway. Multiple transit routes are now being managed by different authorities, adding to uncertainty for global shipping.
Oil prices edged higher as traders balanced the easing of immediate military tensions against continuing risks to energy supplies. Brent crude rose 0.73%, while WTI gained 0.98%. Gold prices weakened as demand for traditional safe-haven assets eased, with gold futures falling 0.53% to US$4,074.47 per ounce and spot gold declining 0.71% to US$4,060.21.
UK Corporate Round-Up
BT (LSE:BT.A) agreed to combine its international enterprise operations with Verizon (NYSE:VZ) in a 50:50 joint venture expected to generate around US$4 billion in annual revenue. Under the agreement, Verizon will make a US$625 million equalisation payment to BT, while the UK telecoms group also updated its earnings and revenue guidance to reflect the planned separation of its international operations.
Haleon (LSE:HLN) has reportedly submitted a bid for US supplements manufacturer Thorne, according to Reuters. The move would expand Haleon’s presence in the approximately US$70 billion US dietary supplements market. Thorne, which was acquired by L Catterton in 2023 for US$680 million, is understood to have attracted interest from several strategic buyers.
AstraZeneca (LSE:AZN) and its partner Daiichi Sankyo (TG:D4S) received a positive recommendation for European Union approval of Datroway as a first-line treatment for triple-negative breast cancer. The recommendation follows Phase III trial data showing the therapy extended median overall survival by five months compared with chemotherapy.
