UK Stocks Decline as Oil Prices Surge on Stalled US-Iran Diplomatic Efforts
Market Overview and Key Drivers
Stock Market Performance
Sept 24 (Reuters) - London shares fell on Thursday as crude oil prices continued to rise amid little progress towards a US-Iran deal, fuelling inflation concerns and lifting government bond yields.
The blue-chip FTSE 100 index fell 0.05% to 10,700.05 points by 1007 GMT, while the midcap FTSE 250 slipped 0.60%.
Sector Highlights
Energy Sector
• Oil prices extended gains after climbing 4% in the previous session as US-Iran diplomatic talks showed no concrete sign of progress. UK's energy giants rose, with BP gaining 1.9% and Shell adding 1.4%. [O/R]
Industrial and Banking Stocks
• Industrial stocks were the biggest drags, with Rolls Royce and BAE Systems down 2% and 1.3% respectively.
• British banks dipped 1%, with heavyweights HSBC and Standard Chartered down over 1% each.
Other Notable Movers
Homebuilders
• Homebuilder Vistry slipped 6.3% after it lowered its annual profit expectations and said it would take a £470 million ($622.51 million) hit from its strategic overhaul.
Technology Sector
• Raspberry Pi jumped 7.7% after the single-board computing company reported higher first-half revenue and pretax profit.
Ex-Dividend Stocks
• Insurer Standard Life and technology services provider Computacenter shed 4.3% and 3% respectively, as their shares traded ex-dividend.
Bond Markets and Fiscal Policy
Bond Yields
• Bond markets were in focus again as UK gilt yields rose in line with global bond yields, with the benchmark 10-year gilt yield hitting a more than one-week high at 5.38%.
Fiscal Policy Developments
• British finance minister John Healey may accept a smaller fiscal buffer to reduce tax rises in next month's budget as investors signalled the gilt market would not be spooked by a more modest headroom target, the Financial Times reported.
Monetary Policy and Economic Outlook
Bank of England Stance
• Bank of England Deputy Governor Clare Lombardelli said that interest rates will likely have to rise if energy prices stay elevated, barring clear evidence of a weaker economy.
• Traders are fully pricing in at-least one 25-basis-point hike by the BoE this year, according to data compiled by LSEG.
Global Context
International Relations
• Investors are also focused on the Trump-Xi summit, seen as largely symbolic despite efforts to project stability between both sides amid deep rivalry.
(Reporting by Anand Gopal in Bengaluru; Editing by Vijay Kishore)
