The FTSE 100 opened lower on Tuesday, ending a four-session run of gains, as oil rose on reports of US strikes on Iran's Qeshm Island and a weak set of numbers from Primark's owner landed on an already nervous morning. At 8.25am the index was down 0.5 per cent at 10,710.52. The FTSE 250 was down 0.6 per cent. Monday's close had been 10,761.33, a gain of 31.55 points, or 0.3 per cent, and a fourth up day.
Brent crude was up 1.7 per cent at 106.56 dollars a barrel at the same time. West Texas Intermediate was up 1.5 per cent at 97.86 dollars. That is a partial reversal of Monday, when talk of fresh talks and a conditional offer to reopen the Strait of Hormuz knocked Brent down to about 105 dollars by the London close, from 117.61 dollars on Friday. Early Monday, before that slide deepened, Brent had been at 111.84 dollars. Qeshm sits on the strait. A limited strike is still a strike, and the oil market has spent the autumn treating every headline from that water as a price.
Why the open split in two directions
Susannah Streeter, chief investment strategist at Wealth Club, said the US midterm elections were opening "with a fresh wave of strikes on Iran", and that the action on Qeshm ran against the more diplomatic message Washington had been sending. She put Brent back above 106 dollars, up around 2 per cent, and said the move still looked contained so long as talks were thought likely to resume. American voters are at the polls on Tuesday, with the House and a third of the Senate in play. Final results may take longer than a night.
The other weight was technology, felt in London at one remove. The Nasdaq closed Monday 1.1 per cent lower as investors marked down spending on artificial intelligence. Asia followed. London, with less of its index in that trade, was never going to match a Korean or Taiwanese sell-off. It did not need to. Retail and the oil reversal were enough to break the streak that had followed John Healey's Budget.
Tuesday's Open, 8.25am London
- FTSE 100: 10,710.52, down about 0.5 per cent. Monday's close was 10,761.33.
- Brent: 106.56 dollars, up 1.7 per cent. WTI: 97.86 dollars, up 1.5 per cent.
- Associated British Foods: adjusted operating profit 1.508 billion pounds, down 14 per cent. Shares about 3 per cent lower.
- Monday's manufacturing PMI: 52.8, a five-month high, from 51.9.
- Bank Rate is 3.75 per cent. The Monetary Policy Committee announces on Thursday 5 November.
Primark's owner, and who rose
Associated British Foods reported adjusted operating profit of 1.508 billion pounds for the year to 12 September, down 14 per cent. The company pointed to weaker spending at Primark and a sharp fall in European sugar prices. The shares were about 3 per cent lower and led the consumer drag on the index. On the other side of the board, early risers included Centrica, up a little over 3 per cent, and Hiscox. Utilities and insurers were the shelter. Energy producers, punished on Monday when oil fell, had a reason to steady, but the index as a whole did not.
Monday's factory survey is now in, and it did not cool the rate debate. The manufacturing PMI rose to 52.8 in October, from 51.9, a five-month high. The compilers linked that resilience, and the rise in input prices, to shorter odds on a Bank of England increase. Bank Rate stands at 3.75 per cent. A quarter-point rise to 4 per cent on Thursday is widely expected. Market pricing has put the chance at about 95 per cent. It would be the first increase in more than three years.
What Thursday is really about
Oil is the hinge. A price near 105 dollars, if it had stuck, would have helped the inflation path Healey is trying to defend in the Commons today. A price climbing back through 106, with a flare on an island in the strait, puts that help in doubt before the Monetary Policy Committee has sat down. Governor Andrew Bailey's new forecasts will be read for any sign that inflation is still seen above 4 per cent early next year. Any pushback against a run of further rises would be taken as dovish. Silence would not.
Voters, in a YouGov poll published this morning, call the Budget fair and expect it to change little. The gilt market has been calmer since Friday's 10-year close at 5.299 per cent. Calm is not the same as comfortable, and an oil shock on the morning of Treasury questions is a reminder of which price this government does not control. The next print that matters is not another company result. It is Thursday's decision, and the sentences around it.