Derren Nathan, head of equity research, Hargreaves Lansdown: “The FTSE 100 is expected to open down today against a backdrop of higher oil prices, and a seemingly unbreakable diplomatic deadlock between Tehran and Washington after President Trump warned that the ceasefire may be on “life support”. Back at home, rising government borrowing costs aren’t helping either, with Prime Minister Sir Keir Starmer’s leadership under increasing pressure. The potential for a fiscally looser successor may be weighing on rate expectations, but the inflationary influence of higher-for-longer oil prices is likely to be the bigger driver. With 10-year gilts now paying just over 5%, any movements in the yield will be closely monitored.
Cost pressures are contributing to downbeat consumer data for April, out today from Barclaycard and the British Retail Consortium. Barclaycard said card spending fell 0.1% year-on-year, the first decline since 2024. Staying at home is coming back in vogue, with digital content and subscription spending rising 9.2% - a sharp contrast to the 5.7% decline in travel, with airline spend down a further 8.3%. It’s in times like these that airline business model strengths and weaknesses become apparent. Among the UK-listed names, IAG stands out as a high-margin business, with a diverse route network and a sensible fuel-hedging strategy.
The British Retail Consortium April report showed a 3% decline in retail sales for April. However, the timing of Easter was a considerable drag. March and April combined make for a more meaningful comparison, with sales up 1.5%. The Easter shift was likely the key reason for a 2.5% decrease in food sales, but big-ticket items also fell, and consumer confidence remains fragile.
Imperial Brands first half results landed as expected, with underlying revenue up 1.8% to £3.7bn. Strong pricing in tobacco has offset continuing volume declines, and 7.5% increase in next generation products (vapes, oral and heated tobacco) saw a strong performance in Europe and emerging markets, masked by weakness in the US, where heavy discounting saw sales fall. 2026 guidance remains unchanged, but with first half underlying operating profit up just 0.6%, there’s still work to do to hit the 3-5% full-year target. With management holding back on buybacks for now, there’s not much for investors to latch onto today.
Brent crude prices remain stubbornly high at close to $105 per barrel. The closure of the Strait of Hormuz has moved the narrative firmly away from oversupply worries towards fears of a deficit. Saudi Aramco CEO Amin Nasser said the market has lost around 100 million barrels of output per week, and that even a few weeks of further disruption could significantly delay a return to market stability.
US stock futures are down this morning after both the S&P 500 and NASDAQ Composite hit fresh highs. Corporate strength has outweighed geopolitical tensions, with the S&P 500 on track to deliver a 27% increase in earnings per share over the first quarter, which, according to FactSet, would be the fastest growth since the end of 2021.
The strong US economy and the inflationary impact of the Middle East crisis have pushed interest-rate cut expectations out to at least the end of this year. Today’s key data point is the US Consumer Price Index print for April, which is expected to show core inflation accelerating to 2.7% from 2.6% in March, and a bigger jump in headline prices from 3.3% to 3.7%, which includes energy costs. The risks are skewed to a hotter-than-expected increase in prices, and while headline numbers may not move the dial, a higher-than-forecast core number could at least put a temporary brake on market optimism.”
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