-
FTSE 100 up 6 points to 9,990
-
Attacks on Iran and Israel, the US suspension only applies to power sites
-
Results posted by Kingfisher, Bellway, PZ Cussons
The PMI data is worrying, said market analyst Kathleen Brooks at XTB, with input prices jumping to their highest level in three years, “showing the impact the Middle East conflict is having on the UK economy”.
“Business expectations for the coming year fell sharply, there was a rapid increase in cost pressures across the private sector and the seasonally adjusted input cost index rose 14 points between February and March, the biggest monthly acceleration in inflation since 1992.
“March’s PMI reading saw a drop in new employment for the first time in 4 months, and respondents noted cautious consumer spending patterns since the start of the war. Business expectations for the coming year fell to their lowest level in 9 months, and manufacturers again increased their output costs, likely adding to the upward pressure on the UK’s CPI report for March.
“The UK PMI report data was weaker than the headline figures suggest, and, for now, the headline figures remain in an expansionary zone. However, the data shows that the economic fallout from the war is already starting to impact the UK economy, and inflationary pressures and weak growth will weigh heavily on the UK economy as we move into Q2.”
The UK’s preliminary PMI reading for March was weaker than expected, with the composite PMI falling to 51.0 from 53.7 in February.
The PMI reading for the services sector was 51.2, weaker than expectations of 52.9, while the manufacturing survey was stronger than expected at 51.4, while expectations were 50.
Chris Williamson, chief economist at S&P Global Market Intelligence, which produced the research, says: “The war in the Middle East hit the UK economy in March, dampening growth while pushing up inflation.
“Production growth in all industries and services has slowed to a trickle as companies blame lost business on events in the Middle East, whether due to increased risk among customers, rising price pressures, high interest rates, or disruptions in transportation and supply.
“Inflationary pressures have increased sharply due to rising energy prices and disruptions in supply chains. The acceleration of cost growth in the manufacturing sector has been the worst, the worst since the drop in energy prices following Black Wednesday in 1992.
“The full impact on inflation and economic growth depends not only on the duration of the war but also on the length of disruptions to energy and shipping markets, although the PMI numbers for March clearly underline how the risks of low growth and the risks of inflation have already materialized.
“The Bank of England faces a challenging period where it will need to balance these risks to growth and inflation when setting policy, seeking to mitigate the potential for inflation to become more concentrated while ensuring that a hawkish interest rate outlook does not exacerbate downside risks.”
The FTSE 100 slipped into the red after spending most of the first hour on Tuesday in the positive zone.
Reports from the Middle East detail that Iran is attacking Israel in retaliation for previous waves on the other side. A military base in Iraq was hit earlier. Amazon said last night that its AWS services in Bahrain were “disrupted” due to drone attacks in the area.
It follows in the same footsteps of its continental European counterparts. While the Footsie was down 0.4% and the domestically-focused FTSE 250 was off 0.9%, Germany’s DAX was down 0.6% and France’s CAC 40 was just below the bottom.
Oil prices are rising. Brent crude costs $102.3 a barrel.
Mining stocks continued to struggle on the London index, with Antofagasta, Anglo American, Fresnillo, Glencore and Rio Tinto all down between 3% and 1%, as copper prices fell and precious metals weakened.
Housebuilders and financials also struggled, with Barratt Redrow and Persimmon both off around 2%, while HSBC and Barclays led the lower bank group, down 1.2-1.7%.
A few big fellas.
Shares in Trustpilot fell more than 10% after private equity firm Advent sold a £46 million stake at a discount.
And Bellway fell nearly 9% after interim results showed steady progress, with investors worried over the shock of the Middle East war leading to renewed volatility in the mortgage market.
All FTSE 350 housebuilders are in the red this morning, though that may be a reflection of broader concerns.
Bellway CEO Jason Honeyman said: “The ongoing conflict in the Middle East increases the risk of both cost-push inflation and the impact on consumer demand, and we have already seen volatility return to the mortgage market.”
Nothing new there really.
“Despite this,” he said, “I am confident that our self-reliance and our drive to use capital wisely will help mitigate the impact of our strategy to increase cash generation and shareholder returns.”
Downing Street has said it will not issue new licenses for oil and gas exploration despite a warning from energy trade group Offshore Energies that the UK “urgently” needs a greater supply of domestically produced energy.
A government spokesman told the Guardian: “Issuing new licenses to explore new fields will not give us energy security and will not take a dime out of debt.”
The spokesman also noted that international markets are pricing in British debt. “The only way to really protect yourself from these rising prices is to get off the rollercoaster of fossil fuel markets.”
The FTSE 100 opened 37 points higher at 9,931.
There is a mix of sectors represented among the top performers: private equity investor 3i Group, medical device maker ConvaTec, data provider RELX all up more than 2%, then Autotrader, Experian, Rightmove and Pearson. Many of those stock names have been hit by AI-related concerns in the first two months of the year.
Among the fallers, miners and housebuilders dominated the index, with Antofagasta down 2.6%, Barratt Redrow down 1.5%, Anglo American and Persimmon down 1.2%.
A few more updates.
Fevertree Drinks posted a 2% rise in full-year revenue to £375 million but the premium mixer brand saw profits fall due to start-up costs from the first year of its US distribution partnership with Molson Coors and a new environmental tax.
Soap maker PZ Cussons said it expected full-year profit to come in at the lower end of its guidance range after continuing strong trading in the third quarter.
Like-for-like income rose 6.3% in the three months to 28 February, a slight decline from the 9.5% recorded in the first quarter.
Kingfisher has rewarded investors with a repeat of its £300 million share buyback program after increasing annual profits by 6% last year and seeing further growth.
The FTSE 100 retailer, which operates the B&Q and Screwfix chains, made adjusted profit of £560 million in the year to 31 January 2026, above the midpoint of its guidance range of £540-570 million, driven by strong sales volumes, wide profit margins and tight cost controls.
As well as the new purchase, the full-year dividend was also increased to 12.4p per share.
Next year, the group is targeting adjusted profit of £565-625 million and free cash flow of £450-£510 million.
Although Iran’s denial of the peace talks demanded by Donald Trump has led to great caution in the markets, yesterday’s price action “suggests that investors are more afraid of missing the post-war meeting … rather than getting it wrong”, said market analyst Ipek Ozkardeskaya at Swissquote. “They continue to look for any hint of optimism.”
Meanwhile, central banks are “looking through a very critical lens”, he said, with European Central Bank officials, for example, warning that the current energy shock could turn into stagflation if rates remain high and volatile.
“The idea that Trump can act alone and orchestrate the results is untenable if his ally refuses to get involved. Any decision in the Middle East also depends on Iran’s willingness to be deterred.
“The Strait of Hormuz remains tight, with a limited number of tankers crossing the critical strait,” he adds.
Trump’s five-day suspension was called just before the US trade opened yesterday and will end at the end of the trading week, something that has not yet passed.
“What happens next is anyone’s guess,” Ozkardeskaya said. “Market sentiment is fully dependent on war topics and energy prices. The reaction is very emotional: investors want the war to end, the recent selloff to be a ‘dip’, and hold that dip. But the uncertainty is still there, and the TACO trade is only stable if Iran plays along. So we wait – we watch both the headlines and the data.”
Today we will provide a first look at how economic sectors around the world are reacting to rising energy prices and escalating tensions in the Middle East as the first March PMI survey for several major economies is released.
Early releases from Australia and Japan showed weakness in both manufacturing and services PMIs.
The FTSE 100 is expected to recover slightly on Tuesday morning, as energy prices fell sharply as markets wait to find out whether Donald Trump’s peace talks with Iran hold weight.
The future of the London blue-chip index points to a rise of 16 points in early trade, after yesterday saw a loss of 240 points at the start of the 100 intraday gain before finishing at 9,894.15, 24 points lower than the previous week.
The move followed President Trump saying he would call off planned military strikes on Iran’s energy infrastructure following what he described as “very positive and productive” talks with Tehran, although Iran quickly denied there had been any “direct or indirect contact” with the US.
Still, US stocks rose sharply, with the Dow Jones and Nasdaq Composite indexes both up 1.4% and the S&P 500 gaining 1.2%.
Asian markets are still green this morning, with the Hang Seng up 2.5% in Hong Kong, and benchmarks in Tokyo, Shanghai and Mumbai up around 1.4-1.8%.
Brent crude oil stands at just under $102 a barrel, down from $112 in the past 24 hours.
