Category: Top Story

UK equities traded slightly lower on Wednesday after inflation data showed headline consumer prices remained unchanged in May, while stronger-than-expected services inflation reinforced expectations that the Bank of England will remain cautious when it announces its latest interest rate decision on Thursday.

The FTSE 100 fell 0.13%, while Germany’s DAX declined 0.39% and France’s CAC 40 eased 0.03%. Sterling was also marginally weaker against the U.S. dollar, slipping 0.10% to $1.3418.

Headline Inflation Holds at 2.8%

According to the Office for National Statistics, UK consumer price inflation remained at 2.8% in the year to May, matching April’s reading and coming in below expectations for an increase to 3%.

On a monthly basis, prices rose 0.2%, unchanged from the previous month.

Transport costs provided the largest upward contribution to inflation, helped by a 10.3% increase in air fares between April and May. Meanwhile, food and non-alcoholic beverages acted as the largest drag on the index, with annual food inflation slowing to 2.2%, its lowest level since December 2024.

Services Inflation Remains a Concern

While headline inflation was stable, the services component accelerated to 3.7% from 3.2%, suggesting underlying price pressures remain more persistent.

Analysts noted that the stronger services reading may limit expectations for near-term monetary easing and could help support sterling despite broader market uncertainty. Expectations for further Bank of England rate increases have already moderated in recent weeks, but policymakers are likely to remain cautious given the resilience of domestic inflation pressures.

Oil Extends Decline as Markets Price in Middle East Developments

Energy markets remained under pressure, with Brent crude falling below $79 a barrel for the first time in three months and U.S. benchmark WTI crude declining by more than 1%.

The move extended losses from the previous session as traders continued to factor in the partial reopening of the Strait of Hormuz ahead of the expected formal signing of a U.S.-Iran agreement later this week.

Although oil prices remain above pre-conflict levels of around $65 per barrel, the recent retreat has eased some concerns over energy-driven inflation and is increasingly being viewed as a supportive factor for central banks in both the UK and Europe.

Gold was little changed, with spot prices easing 0.05% to $4,329.16 per ounce.

Geopolitical Tensions Remain in Focus

Attention also remained on developments in the Middle East following comments from U.S. President Donald Trump at the G7 summit in France.

Trump criticised Israel’s military campaign in Lebanon, saying the country had been fighting Hezbollah “too long” and that “too many people are being killed.” He also said Prime Minister Benjamin Netanyahu needed to be “more responsible with respect to Lebanon.”

The United Nations peacekeeping mission in Lebanon reported a reduction in cross-border violence, although Lebanese state media said Israeli strikes killed at least four people on Tuesday.

Meanwhile, Iran warned of a “harsh response” if Israeli military operations continue, while Iranian Foreign Minister Abbas Araghchi described the Lebanon conflict as “linked and interdependent” with the broader regional agreement currently under discussion.

Trump said the text of the agreement would be released within days and submitted to Congress for review, while Vice President JD Vance said the delay reflected diplomatic sensitivities surrounding the process.

UK Corporate Highlights

Hays Continues Portfolio Reshaping

Hays (LSE:HAS) completed the disposal of its operations in the Czech Republic, Denmark, Hungary, Luxembourg, Romania and Sweden to Meraki Capital, generating approximately £4 million in net cash proceeds. The recruitment group is also reviewing strategic options for a further seven markets as part of its ongoing restructuring programme.

AO World Delivers Record Profit

AO World (LSE:AO.) reported a 16% increase in annual adjusted pre-tax profit and announced plans to return a further £20 million to shareholders through a special dividend and share buyback programme. The retailer also highlighted progress in expanding its customer ecosystem through the launch of AO Mobile.

PZ Cussons Upgrades Guidance Again

PZ Cussons (LSE:PZC) raised its profit expectations for the fourth time, saying adjusted operating profit for FY2026 is now expected to be at or slightly above the upper end of its £53 million to £57 million guidance range. The company cited strong sales momentum and stability in the Nigerian naira as key contributors to the improved outlook.

Equities Gain Ground as Inflation Concerns Ease

European stock markets traded higher on Tuesday, supported by a continued decline in oil prices that helped ease concerns over inflation and the potential path of global interest rates.

Brent crude remained close to $82 per barrel after reports suggested that U.S. President Trump could unveil details of a preliminary agreement aimed at ending the conflict with Iran ahead of Friday.

While the exact provisions of the agreement have yet to be disclosed, Trump indicated that the Strait of Hormuz could reopen as early as Friday, raising expectations of improved energy flows and lower supply risks.

Central Bank Meetings Remain in Focus

Investors also kept a close eye on upcoming policy announcements from the U.S. Federal Reserve and the Bank of England, both of which are expected to provide fresh guidance on monetary policy.

The prospect of lower energy costs has helped reduce pressure on central banks, although markets remain alert to any signals regarding future interest-rate decisions.

Major European Indices Move Higher

Among the region’s leading benchmarks, France’s CAC 40 advanced 0.8%, while the UK’s FTSE 100 gained 0.6%.

Germany’s DAX also moved higher, rising 0.5% as investors welcomed improving risk sentiment across global markets.

UniCredit and Commerzbank Extend Gains

Banking stocks attracted attention after Germany formally rejected UniCredit’s (BIT:UCG) attempt to acquire a stake in Commerzbank (TG:CBK).

Despite the setback to the proposed transaction, shares of both lenders moved higher during trading as investors assessed the implications of the government’s decision.

Saab Jumps on French Defence Contract

Swedish defence and aerospace group Saab (BIT:1SAAB) posted strong gains after securing a contract from France’s defence procurement agency for its anti-tank weapons systems.

The agreement adds to Saab’s growing order book amid increasing defence spending across Europe.

Hilton Food and STMicroelectronics Under Pressure

In London, Hilton Food (LSE:HFG) declined after confirming that Mark Allen will assume the role of group chief executive from July 1.

Meanwhile, STMicroelectronics (BIT:STMMI) (EU:STMPA) fell after announcing plans to issue $1.5 billion of convertible bonds and redeem $750 million of outstanding convertible notes due in 2027 ahead of maturity.

Shares of BAE Systems (LSE:BA.), Rolls-Royce (LSE:RR.) and Babcock International (LSE:BAB) moved higher on Tuesday, climbing between 2% and 2.5% as investors positioned for increased UK defence expenditure and stronger long-term demand across the sector.

The gains reflected growing expectations that government spending on military capabilities will continue to rise amid an increasingly uncertain geopolitical environment.

Defence Budget Review in Focus

Market attention has turned to Defence Secretary Dan Jarvis, who is expected to reassess the government’s defence investment strategy and may seek additional resources from the Treasury.

Jarvis took over the role following the resignation of John Healey last week. Healey stepped down after rejecting a proposed funding package, arguing that it would leave the UK’s armed forces without sufficient resources to meet future requirements.

The former defence secretary opposed a £13.5 billion funding proposal designed to address an estimated £18 billion gap in financing for major military programmes.

Government Signals Further Spending Increases

Investor sentiment was further supported by comments from Chancellor Rachel Reeves, who said there would be “a further big uplift in defence spending” as part of the government’s long-term investment plans.

Prime Minister Keir Starmer has also committed to increasing defence spending to 3% of gross domestic product during the next parliamentary term, with the objective of reaching that level by the end of 2034.

The pledge is expected to underpin future contract opportunities for leading defence contractors, many of which already have extensive multi-year order books.

Geopolitical Risks Support Sector Outlook

Defence stocks also benefited from heightened geopolitical tensions ahead of the G7 leaders’ summit in France, where security concerns involving Russia and Iran are expected to feature prominently on the agenda.

The conflict involving Iran has now entered its fourth month, while tensions with Russia remain elevated following the seizure of a Russia-linked oil tanker by Britain’s Royal Marines in the English Channel over the weekend.

Starmer is expected to use the summit to advocate for tougher sanctions against Russia and additional military and energy assistance for Ukraine.

Defence Remains a Strong Performer Across Europe

The defence industry has been one of the standout sectors in UK equity markets in recent years, supported by a broad revaluation as Western governments increase military budgets in response to evolving security challenges linked to Russia, China and other geopolitical threats.

The trend extends across Europe, where defence spending continues to rise sharply. Industry estimates suggest that total European Union defence expenditure will exceed €392 billion this year, compared with €221 billion in 2021.

The sustained increase in military investment is expected to provide a favourable backdrop for defence companies across the continent, supporting long-term growth prospects for equipment manufacturers, engineering groups and military service providers.

Investors remained focused on a mix of geopolitical, monetary policy and corporate developments on Tuesday, with attention centred on the emerging U.S.-Iran peace framework, the Bank of Japan’s latest rate increase and the continued surge in SpaceX (NASDAQ:SPCX) shares.

Wall Street Futures Pause After Strong Rally

U.S. equity futures traded close to unchanged as markets digested Monday’s gains and awaited additional details on the agreement between Washington and Tehran.

At 07:10 GMT, Dow futures were up 0.1%, S&P 500 futures were flat and Nasdaq 100 futures slipped 0.1%.

The previous session saw strong gains across major U.S. indices after news of the agreement helped reduce concerns about prolonged instability in the Middle East. The Dow climbed 0.9%, while the S&P 500 and Nasdaq rose 1.7% and 3.1%, respectively.

“The driver of the equity advance was the Iran deal, not so much because people feel the agreement will be a powerful source of incremental upside itself but instead that by removing it as a potential risk factor, stocks will be able to focus on what are encouraging earnings fundamentals,” analysts at Vital Knowledge said in a note.

Investors are now preparing for the Federal Reserve’s latest policy decision, with interest rates expected to remain unchanged and markets closely watching guidance from Fed Chair Kevin Warsh.

Focus Remains on Hormuz Reopening

President Donald Trump said the Strait of Hormuz should be fully operational by Friday, when U.S. and Iranian officials are expected to formally sign the interim agreement in Switzerland.

Speaking at the G7 summit in France, Trump stated that the vital shipping route is already “partially opened.”

“Ships are starting to go out now, and on Friday it will be completely opened,” he said.

While optimism has improved, reports suggest some officials believe shipping conditions may take longer to normalize.

The framework agreement is expected to include a 60-day extension of the ceasefire, the reopening of Hormuz and the lifting of the U.S. blockade on Iranian ports. Vice President JD Vance cautioned that “there are a lot of very important details to figure out.”

Oil Retreats as Supply Fears Ease

Crude prices extended recent losses as concerns over prolonged supply disruptions continued to ease.

Brent crude declined 1.3% to $82.12 a barrel after previously rallying above $110 during the height of the conflict. The market remains sensitive to developments in Hormuz, which normally handles around one-fifth of global oil and LNG shipments.

Although the agreement has improved sentiment, analysts expect energy markets to remain volatile until normal shipping volumes are fully restored.

BOJ Delivers Another Rate Increase

The Bank of Japan raised its benchmark interest rate by 25 basis points to 1.0%, marking the highest level in more than three decades.

The decision reflected ongoing concerns that higher energy costs could continue feeding through to broader inflation.

“The price pass-through stemming from the rise in crude oil prices has been progressing at a relatively fast pace in business-to-business transactions, which could spread to an increase in consumer prices,” the BOJ said in a statement.

The central bank also confirmed plans to slow its bond-buying programme in the months ahead.

SpaceX Approaches $3 Trillion Valuation

SpaceX (NASDAQ:SPCX) continued its extraordinary post-IPO performance, extending gains after another strong trading session.

Following the largest stock market debut on record, the company’s market capitalization has rapidly expanded from approximately $2.1 trillion at Friday’s close to nearly $3 trillion.

The shares gained 19.6% on Monday and added a further 11.2% in after-hours trading, reaching around $213.99.

The rally has elevated SpaceX into the ranks of the world’s largest publicly traded companies, placing it alongside names such as Alphabet, Apple and Nvidia.

European equities traded cautiously higher on Tuesday, with investors pausing after a broad relief rally and turning their attention back to economic fundamentals following the easing of Middle East tensions.

The pan-European STOXX 600 rose 0.1%, remaining close to the record closing level reached in the previous session.

Major Indices Post Modest Gains

Across the region, gains were limited but broadly positive. Germany’s DAX advanced 0.2%, France’s CAC 40 added 0.3%, Italy’s FTSE MIB climbed 0.6% and Spain’s IBEX 35 rose 0.2%.

In the UK, the FTSE 100 gained 0.2%, although it continued to lag some of its European peers after missing much of Monday’s rally.

Energy Exposure Weighs on London

London’s benchmark index remained under pressure from weakness in the energy sector, with heavyweight constituents including Shell (LSE:SHEL) and BP (LSE:BP.) declining alongside oil prices following the recent ceasefire agreement.

“The FTSE 100’s lukewarm performance was in stark contrast to its European and US counterparts which charged ahead, although gains were tempered a bit in Europe amid considerable unanswered questions about this promised resolution to the Middle East conflict,” said Dan Coatsworth, head of markets at AJ Bell.

Investors Await Details of U.S.-Iran Agreement

Market sentiment continued to be supported by hopes that tensions in the Middle East are easing after U.S. President Donald Trump said a preliminary agreement to end the conflict had been signed by the United States and Iran.

However, investors remain cautious as key details of the arrangement have yet to be disclosed.

Attention Turns to Inflation and Growth

The recent market recovery has lifted European equities close to 8% higher for the year, narrowing the performance gap with the S&P 500 in the United States.

While European markets have recovered losses suffered during the conflict, analysts note that further gains may prove more difficult. Unlike the U.S. and parts of Asia, Europe lacks a large technology sector capable of fully benefiting from the artificial intelligence-driven growth trend that has powered global equity markets higher.

Market participants are also watching the impact of the European Central Bank’s earlier interest-rate increase, with future gains likely to depend on how well companies can protect margins in an environment of elevated borrowing and operating costs.

STMicroelectronics Falls After Bond Sale

Among individual stocks, STMicroelectronics (BIT:STMMI) (EU:STMPA) declined 2.5% after announcing a $1.5 billion convertible bond offering split across two tranches.

UK equities traded modestly higher on Tuesday as investors continued to evaluate the implications of the recently announced U.S.-Iran memorandum of understanding, with sentiment supported by expectations that a formal signing ceremony will take place in Geneva later this week.

By 07:14 GMT, the FTSE 100 had gained 0.25%, while Germany’s DAX rose 0.23% and France’s CAC 40 advanced 0.33%. Sterling weakened 0.10% against the U.S. dollar to trade at $1.3409.

Oil Prices Ease as Hormuz Reopening Progresses

Energy markets remained focused on developments surrounding the Strait of Hormuz, with traders continuing to factor in the gradual restoration of shipping activity through the key waterway.

Brent crude fell 0.91% to $82.41 per barrel, while WTI crude declined 0.74% to $80.15. Gold prices also moved lower, with spot gold down 0.40% at $4,326.29 per troy ounce as demand for traditional safe-haven assets softened.

Markets Monitor Next Steps in U.S.-Iran Framework

Investors remain closely focused on the U.S.-Iran agreement, which was digitally signed by President Trump and Vice President Vance ahead of a planned formal ceremony in Geneva coordinated by Switzerland, Pakistan and Qatar.

The framework links sanctions relief and Iran’s reintegration into the global economy to verified reductions in its enriched uranium stockpile, acceptance of international inspections and restrictions on support for regional militant groups.

President Trump said on Monday that commercial vessels are already moving through the Strait of Hormuz and that full clearance of the route is expected by Friday. Vice President Vance also stressed that no funds have been released under the agreement and dismissed reports suggesting otherwise.

Global Leaders Respond to Agreement

Speaking at the G7 summit in Evian, French President Macron described the agreement as “a very important step towards peace and for the global economy.”

Israeli Prime Minister Netanyahu adopted a more cautious position, reiterating that Iran would never be allowed to obtain nuclear weapons “with or without a deal.”

Meanwhile, Iran’s Foreign Ministry stated that Lebanon remains part of the broader understanding reached under the agreement, a claim that Israeli officials rejected.

UK Announces Ukraine Nuclear Fuel Support Package

At the G7 gathering, Prime Minister Starmer unveiled a £210 million package backed by UK Export Finance to support supplies of enriched uranium to Ukrainian nuclear operator Energoatom.

The agreement is intended to help power Ukraine’s nuclear facilities over the next two years and forms part of broader efforts to strengthen the country’s energy security.

The UK government is also preparing a fresh sanctions package that would increase the number of sanctioned shadow fleet and Russian LNG vessels to more than 600. Officials said Britain would be the first country to sanction several LNG vessels involved in transporting restricted Russian cargoes.

Thames Water Rescue Plan Faces Scrutiny

Back in the UK, attention remained on Thames Water after Environment Minister Emma Reynolds reportedly raised concerns with regulator Ofwat regarding the utility’s proposed £10 billion rescue package.

The creditors’ proposal is understood to have been viewed as “weak” by the government.

Thames Water, which serves around 16 million customers and carries close to £20 billion of debt, remains at risk of nationalisation if a market-based restructuring solution cannot be reached. Reynolds is expected to update Parliament on the situation later on Tuesday.