FTSE 100 Edges Higher on Softer Inflation Signals Amid US-Iran Conflict
Market Performance and Economic Outlook
FTSE 100 Rises Despite Global Risk-Off Sentiment
June 5 (Reuters) - UK's FTSE 100 rose on Friday, bucking a risk-off mood in other global markets, as investors took comfort from data suggesting that inflationary pressures from the Middle East war may be less severe than feared.
The blue-chip FTSE 100 index rose 0.45% as of 12:48 pm GMT, while the midcap FTSE 250 was flat.
Inflation Expectations and Bank of England Survey
Survey Results Indicate Easing Price Pressures
• British businesses expect to increase prices less quickly in the year ahead than they did in April as some of the initial energy price shock caused by the Iran war fades, according to a survey published by the Bank of England.
• The survey of more than 2,000 British companies showed 57% of firms expected to increase their prices in response to the energy price shock, down 7 percentage points from April.
Expert Commentary on Labour Market and Inflation
• "The latest evidence appears to support our view that the weakness of the labour market will prevent the second-round inflation effects that the Bank of England fears," said Paul Dales, chief UK economist at Capital Economics.
• "If so, the Bank of England might stand out from the central bank crowd by not raising interest rates."
Geopolitical Developments and Economic Impact
Middle East Conflict and Oil Supply Concerns
• Still, an early resolution to the conflict and the reopening of the Strait of Hormuz, a critical shipping route for global oil shipments, would be essential to prevent further escalation of the economic impact.
• Iran reaffirmed support for its Lebanese ally Hezbollah and demanded Israel withdraw from southern Lebanon, underscoring complications facing an interim deal to end the broader conflict between Washington and Tehran.
Bank of England Rate Expectations
• Traders expect the BoE to keep borrowing costs unchanged at 3.75% this month, but see one or possibly two quarter-point hikes in rates later this year.
Political and Sectoral Market Highlights
Political Uncertainty in the UK
• Investors are also contending with political uncertainty in the UK.
• Earlier this week, Labour mayor Andy Burnham signalled he would run in any leadership race against Prime Minister Keir Starmer, if he won a local election later this month.
Sector Performance
Tech and Personal Care Stocks Outperform
• Tech shares jumped 2.1% on Friday, while personal care stocks gained 1.7%. Precious metal miners, on the other hand, fell 2.2%.
(Reporting by Niket Nishant in Bengaluru; Editing by Shailesh Kuber)
