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London open: Stocks fall on Middle East tensions as oil prices jump
UK stocks fell on Friday morning after reports of Israel launching a retaliatory attack on Iran emerged, sending oil prices sharply higher.
The FTSE 100 was down 0.6% at 7,827 after an hour’s trade, with airline stocks among the worst performers.
“The generally bearish wave of sentiment following the most recent Middle East attack inevitably washed on to UK shores,” said Richard Hunter, head of markets at Interactive Investor. “Airline shares were hardest hit by the double whammy of higher oil prices and the possibility of fewer flights and therefore lower revenues, not only in terms of flights to the region but also on the possibility that customers might be more cautious about travelling at all.”
Brent crude was up 1% at $88 a barrel, having surged as high as 4.2% early on to $90.75 before paring gains quickly, after reports that Israel struck a target in the central Iranian province of Isfahan, where the country’s nuclear installations are located.
The retaliatory strike followed an Iranian attack with over 300 drones and missiles last weekend, though they caused only minor damage after 99% of the drones and missiles were downed mid-flight.
“We will likely see a further flight to safety before the weekly closing bell on fear of further escalation of tensions during the weekend. Shorting oil and gold is risky as Middle East is boiling. Having exposure to these commodities is a good hedge against the rising geopolitical tensions in the region,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Also weighing on sentiment early on were comments from New York Federal Reserve president John Williams overnight, who warned that monetary policy tightening might be necessary in light of resilient economic data. “If the data are telling us that we would need higher interest rates to achieve our goals, then we would obviously want to do that,” he said.
In other news, German industrial producer prices fell 2.9% in March year on year, driven by lower energy prices, the federal statistics agency said on Friday. Prices rose by 0.2% compared with February, it added. Energy prices in March were down 7% annually and unchanged versus February 2024.
Meanwhile, UK retail sales were flat in March, undershooting expectations, according to figures released on Friday by the Office for National Statistics. Retail sales were unchanged on the month following a revised 0.1% jump in February and versus expectations for a 0.3% increase.
In equity news, FTSE 250-listed investment management firm Man Group dropped 5% after net outflows during the first quarter caught investors by surprise. Assets under management rose by 5% from the preceding three months, as a $9.8bn positive swing in investment performance outweighed $1.6bn in net outflows. However, consensus forecasts were for positive net flows of $1.3bn.
Airline stocks were pulling back after a strong performance the previous session as oil prices rose, with IAG and easyJet among the worst performers on the FTSE 100. Travel agent TUI also fell.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Croda International Plc | +0.78% | +38.00 | 4,887.00 |
| 2 |  |
Unilever Plc | +0.72% | +27.00 | 3,797.00 |
| 3 |  |
Compass Group Plc | +0.65% | +14.00 | 2,183.00 |
| 4 |  |
Imperial Brands Plc | +0.51% | +9.00 | 1,757.50 |
| 5 |  |
United Utilities Group Plc | +0.49% | +5.00 | 1,023.50 |
| 6 |  |
Johnson Matthey Plc | +0.46% | +8.00 | 1,761.00 |
| 7 |  |
Bae Systems Plc | +0.43% | +5.50 | 1,292.50 |
| 8 |  |
National Grid Plc | +0.29% | +3.00 | 1,033.00 |
| 9 |  |
Severn Trent Plc | +0.29% | +7.00 | 2,426.00 |
| 10 |  |
Glencore Plc | +0.28% | +1.35 | 476.35 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Scottish Mortgage Investment Trust Plc | -2.84% | -23.40 | 800.80 |
| 2 |  |
Marks And Spencer Group Plc | -2.60% | -6.50 | 243.70 |
| 3 |  |
Carnival Plc | -2.50% | -26.00 | 1,012.00 |
| 4 |  |
International Consolidated Airlines Group S.a. | -2.06% | -3.50 | 166.30 |
| 5 |  |
Itv Plc | -2.00% | -1.40 | 68.60 |
| 6 |  |
Persimmon Plc | -1.97% | -25.50 | 1,266.00 |
| 7 |  |
Ocado Group Plc | -1.97% | -6.90 | 343.10 |
| 8 |  |
Hargreaves Lansdown Plc | -1.93% | -14.20 | 720.00 |
| 9 |  |
Tui Ag | -1.91% | -11.00 | 563.50 |
| 10 |  |
Sainsbury (j) Plc | -1.90% | -5.00 | 257.60 |
US close: Stocks finish mostly lower as bond yields climb
US stocks were mostly lower on Thursday with the S&P 500 and Nasdaq falling for the fifth straight day as another rise in bond yields dampened risk appetite
The S&P 500 slipped 0.22% while the Nasdaq dropped 0.52%. While the Dow had pared earlier gains by the close it still managed to finish in positive territory, up just 0.06%.
The yield on a 10-year US Treasury note was up 3.8 basis points at 4.631%, nearing the five-month high reached earlier in the week, following a forecast-beating set of inflation figures and hawkish comments from the Federal Reserve prompted investors to push back their projections for when interest rates would start to come down.
“Investor sentiment remained under pressure due to persistent inflation and a robust economy that shows little signs of cooling down despite elevated interest rates,” said Stephen Innes, managing partner at SPI Asset Management.
According to analysts at Vanguard in an interview with Bloomberg, a move past 4.75% in the 10-year US bond yield could prompt traders to abandon their bets on a rally and result in a bond sell-off that could push yields to their highs of 2007 – back above the 5% mark.
Economic data comes in mixed
On the macro front, manufacturing sector conditions in the mid-Atlantic region improved unexpectedly in April, according to the Federal Reserve Bank of Philadelphia’s factory sector index, which rose from 3.2 in March to 15.5 in April (consensus: 1.5). A key sub-index tracking new orders improved from 5.4 to 12.2, while that for shipments jumped from 11.4 to 19.1.
According to the Department of Labor, in seasonally adjusted terms, initial unemployment claims over the week to 12 April were unchanged from the previous seven-day stretch at 212,000. Economists had pencilled-in a small rise to 215,000.
Finally, existing home sales fell 4.3% in March to a seasonally-adjusted annualised rate of 4.19m, according to the National Association of Realtors, partially reversing from a 9.5% rise in February. “Home sales are stuck because interest rates have not made any major moves. More inventory is always welcomed in the current environment”, said NAR chief economist Lawrence Yun.
Market movers
Tesla was down nearly 4% after analysts at Deutsche Bank cut the stock to ‘hold’ and highlighted concerns over its plans to focus on developing Robotaxis after delaying its Model 2. The electric carmaker was also in the news after a WARN notice revealed it was laying off 14% of its workers at two sites in Buffalo, following large-scale job cuts announced earlier in the week.
Shares in credit checking business Equifax traded 8% lower on the back of some disappointing second-quarter guidance. The company forecast earnings of $1.65 to $1.75 a share for the current quarter, well below the $1.87 expected by the market.
Alaska Air shares flew higher following some better-than-expected first-quarter numbers, and DR Horton traded higher after topping expectations with its latest figures.
Online selling platform eBay gained after Morgan Stanley lifted its rating on the stock from ‘underweight’ to ‘overweight’, while Zoom rose after Rosenblatt Securities upgraded the video conferencing company from ‘neutral’ to ‘buy’.
Friday newspaper round-up: Thames Water, Netflix, consumer confidence
“Misleading” and “inconsistent” labels make it hard for shoppers to know where their food comes from, the consumer champion Which? has said, as it found supermarket chains were selling products with “meaningless” statements on their packaging. Retailers must supply the “country of origin” for specific foods including fresh fruit and vegetables, unprocessed meats, fish, wine and olive oil but the rules do not generally apply to processed meat or frozen or processed fruit and vegetables. – Guardian
Thames Water could be renationalised, with the bulk of its £15.6bn debt added to the public purse, under radical plans being considered by the government, the Guardian can reveal. The blueprint, codenamed Project Timber, is being drawn up in Whitehall and would turn Britain’s biggest water company into a publicly owned arm’s-length body. Some lenders to its core operating company could lose up to 40% of their money under the plans. – Guardian
Netflix has enjoyed its strongest start to the year since 2020 as its password sharing crackdown boosted subscriber numbers. The streaming giant added a further 9.3m users in the first three months of the year, boosted by original hits such as Harlan Coben adaptation Fool Me Once and Guy Ritchie’s The Gentlemen. That compares to just 1.75m new subscribers in the same period last year, as the latest figures came in well ahead of analyst forecasts. – Telegraph
Consumer confidence rose to its highest level in two years in the last quarter, boosted by a sharp improvement in sentiment among younger people. Deloitte’s consumer confidence index rose to a net balance of -11 per cent in the first three months of this year, up from a balance of -11.4 per cent in the previous quarter. The rise reflects a sustained decline in the rate of inflation, easing the pressure on consumer finances after they were rocked by the cost of living crisis. It represents a sixth consecutive quarter of rising confidence. – The Times
Shareholders in Home Reit are suing the scandal-hit “landlord for the homeless”, which in turn is planning to take its former investment adviser to court. The company has confirmed that it has received a pre-action letter of claim from Harcus Parker, the law firm representing 300 or so shareholders, who have accused Home Reit of giving them “false, untrue and/or misleading” information. – The Times
