FTSE 100 hits four-month high
Britain’s blue-chip stock index has hit its highest level since the first week of the Iran war this morning.
The FTSE 100 climbed as high as 10,701 points this morning, up 0.4%, its highest level since 3 March.
Precious metals miner Fresnillo (+2.5%), engineering firm Weir Group (+2%), and energy company SSE (+1.8%) are the top risers.
Several factor are lifting the ‘Footsie’, including hopes of a US-Iran peace deal which have pushed the oil price down (and could send it lower…)
A weaker-than-expected US employment report, released yesterday, has also cheered traders by dampening expectations of rises in US interest rates.
Dan Coatsworth, head of markets at AJ Bell, explained:
“Weak jobs numbers would normally be a key reason for central banks to consider cutting rates to stimulate the economy.
The latest US jobs data confirms labour market disappointment but we’re nowhere near the stage where the Fed will reach for the monetary policy scissors to start cutting. We’re more likely to see an adjustment to the Fed’s assessment that implies no change to rates, which is still a win for markets.
Thirdly, investors are ‘rotating’ out of chip stocks (following a stellar start to the year) and into ‘old economy’ companies instead, and there are plenty of those on the London stock market.
Key events
UK electric car sales jumped in June
Elsewhere in the car industry, sales for electric vehicles jumped last month, according to new industry data.
Research organisation New AutoMotive has reported that 64,000 new electric cars were registered in June, a 37.7% year-on-year increase.
That means that electric cars made up 30% of the market last month, with some drivers keen to avoid the jump in petrol and diesel prices after the Iran war began.
Overall, car sales were up almost 15% year-on-year in June.
Ben Nelmes, CEO at New AutoMotive, explains:
“June’s data shows that electric cars are rapidly becoming the mainstream choice for British drivers. With one in three new cars registered in June being fully electric, motorists are switching at an extraordinary pace.
“As petrol and diesel sales continue their steady, structural decline, it’s clear that drivers are voting with their wallets. EVs offer families and businesses lower and predictable running costs, a superior driving experience, and an escape from the volatile global oil markets that have squeezed household budgets for too long.”
JLR sales hit by major fire and Iran war disruption
Jasper Jolly
Jaguar Land Rover suffered a 9% drop in sales in the last quarter caused by disruption from the Iran war and a major fire at a Norwegian supplier that forced Britain’s largest carmaker to shut its factories temporarily.
The manufacturer today reported sales of 79,300 cars to dealers in the three months to June, a 9.2% decline compared with the same period a year earlier.
The company insisted the disruptions were “temporary supply constraints”, including the fire at Raufoss Technology, a Norwegian manufacturer of aluminium parts for car suspensions.
JLR also said the US-Israeli war on Iran caused “market disruption”, as Iran responded by attacking several Gulf neighbours, several of which are large markets for luxury cars such as Range Rovers. Retail sales dropped by 42% in the Middle East and north Africa region, the company said.
Sales to customers were down across every market during the quarter, JLR said, although four-fifths of the sales were of more profitable models.
CNBC: Christine Lagarde leaves door open to early ECB exit
The European Central Bank’s Christine Lagarde has declined to rule out an early end to her term as president, as she mulls a foray into French politics, CNBC report.
Lagarde, whose term as ECB President ends in October 2027, told French newspaper Les Echos an early departure is “possible” ahead of the country’s presidential elections that year.
She said:
“I think a European voice must be heard in the French presidential debate.
If this debate were to present a perspective that diminishes France’s place within Europe, I think it would be necessary to explain why this would be a painful path for our country and our citizens.”
Asked whether she would consider personal involvement in the French Presidential campaign, to support a candidate or run herself, Lagarde said: “I’m going to ask myself some questions.”
Although UK service sector business optimism improved in June, it remains much softer than at the start of 2026, despite peace talk efforts between the US and Iran.
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK suggests UK political uncertainty hit confidence last month.
“The final composite PMI weakened further in June, suggesting that the economy has stagnated across Q2. Indeed, we doubt growth will pick up much through the rest of the year. Even if a Burnham coronation is likely, avoiding a protracted leadership contest, there will still be speculation about the direction of fiscal policy in the coming months. Meanwhile, the US-Iran peace deal isn’t fully secured as yet. All of that will keep uncertainty elevated, limiting growth to around 0.1% per quarter for the rest of the year.
“The weak PMI continues to be driven by services activity, which is the lowest since January 2023, where anecdotal evidence suggests that the war in the Middle East and domestic political turmoil continues to dampen sentiment, prompting consumers to pull back on discretionary spending. In the immediate term, activity may remain weak with new orders dropping to the weakest since July 2025 as uncertainty weighs on activity and stockpiling in the manufacturing sector inevitably unwinds.
“What’s more, the downwards revision to the future activity balance between the flash and final release suggests that firms responding later in the month were more pessimistic about the outlook following Starmer’s resignation. We think sentiment will remain weak until firms have a clearer idea of the direction of fiscal policy at the next budget.
Sterling set for biggest weekly jump since early April
The pound is heading for its biggest weekly jump in 12 weeks against the US dollar, as the City takes the looming coronation of Andy Burnham as Labour leader and prime minister in its stride.
Sterling has jumped by 1.2% so far this week, it’s biggest weekly rise since the first week of April, to $1.3355.
The pound has risen against the US dollar for seven days in a row, helped by Burnham pledging to work within the existing fiscal rules.
The dollar has been dropping generally, as expectations of interest rate rises have fallen, and optimism over the US-Iran peace deal have spurred demand for riskier currencies.
The FTSE 100 couldn’t hold onto its four-month high.
The blue-chip share index is now in the red, down 45 poinrs or -0.4% at 10,607 points, with the drop in UK service sector activity dampening the mood in the City.
Wider UK economy shrank too
The drop in service sector activity in June pulled the wider British private sector into contraction.
Services make up around three-quarters of the UK economy, which shrank slightly in June for the second month running.
The UK Composite PMI (which tracks activity across the economy) dropped to 49.3, down from 49.7 in May and below the neutral 50.0 value for the second month running.
Pay rises, higher motor fuel costs and more expensive IT equipment all drove up service sector costs in June, the PMI report shows.
It says:
Around 42% of the survey panel reported an increase in their average cost burdens in June, while only 3% signalled a reduction.
However, the resulting seasonally adjusted index pointed to a further slowdown in the rate of input cost inflation following the 41-month peak seen in April.
Higher input costs typically reflected rising wages, transportation bills and prices paid for technology items (especially computer hardware).
Services firms cut jobs as demand sinks
Today’s UK Service PMI report (which polls purchasing managers from across the sector) found there was a “sustained reduction in backlogs of work across the service economy”.
This was due to weak demand, S&P Global reports, adding:
This contributed to another fall in employment numbers, with the pace of job losses the sharpest since February. Many service providers noted either redundancies or the non-replacement of voluntary leavers in response to reduced business requirements and pressure on margins from rising costs.
Weakest UK service sector performance since January 2023 despite World Cup boost
Britain’s services sector shrank in June at the fastest pace in almost three and a half years, as the Iran war hit business confidence and drove up costs.
Data firm S&P Global has just reported that its UK Services PMI, which tracks activity in the sector, fell to its lowest reading since the start of 2023 in June.
It fell to 48.8 in June, down from 49.3 in May, below the 50-point mark showing contraction, and the lowest level since January 2023. Services firms reported a drop in exports, and another fall in employment levels in the sector.
S&P Global reports that service providers typically cited “lacklustre domestic economic conditions, ongoing geopolitical uncertainties linked to the Middle East conflict and general risk aversion among clients”.
Consumer-facing firms suggested that the heatwave in late-June had affected footfall.
However, some businesses in the hospitality sector reported a recent boost to demand linked to the FIFA World Cup – although we’ll find out early on Monday morning if this boost will continue.
Tim Moore, economics director at S&P Global Market Intelligence, explains:
“June data confirmed a clear loss of momentum for the UK economy during the second quarter of 2026, following a positive start to the year. The latest survey indicated a decline in service sector activity for the second month running and, although only modest, the rate of decline was the steepest since January 2023.
Strong cost pressures, lacklustre demand and business uncertainties arising from the Middle East conflict were the most prominent themes highlighted by service sector firms in June. This led to fragile investment sentiment, elevated risk aversion among clients and squeezed consumer budgets, which in turn contributed to the fastest reduction in new work for just over three-and-a half years
Global food prices dip in June
Global food commodity prices have dipped, bringing some relief to struggling consumers around the world.
The UN Food and Agriculture Organisation has reported that its Food Price Index, which tracks a basket of consumable products, fell by 0.3% month-on-month in June.
Increases in the price indices for vegetable oils and meat were offset by declines in sugar, cereals, and dairy products, the FAO reports.
Cereal prices fell by 3.5% in June, which the UN credits to “rapid harvest progress and strong supply prospects in the Black Sea region”. That outweighed concerns over crop prospects in the United States of America and Australia, amid fears of El Niño-related droughts.
Sugar prices fell by 5.7%, due to lower domestic ethanol prices in Brazil (which meant more sugarcane was used for sugar production), and strong sugar exports from Brazil, supported by the depreciation of the Brazilian real against the US dollar.
Dairy prices dropped by 1.5%. Skim milk powder dipped thanks to recovering output in the EU and “improved availabilities” in the US, while butter and cheese prices were pushed down by improving milk availability and increased production.
But… vegetable oil prices jumped by 3.8% in the month. The FAO says palm oil prices “rebounded in June”, due to expectations of tighter export availability from Indonesia, while global rapeseed oil prices were driven up by biofuel demand and unfavourable weather conditions affecting plantings in Australia and Canada.
Meat prices nudged up by 0.4%, with poultry and ovine prices rising, while pig and bovine meat prices declined.
Today’s stock market across Europe comes a day after America’s Dow Jones Industrial Average hit record highs.
Chris Beauchamp, chief market analyst at investing and trading platform IG, explains how the ‘market rotation’ out of chip stocks is moving the markets:
“June was a spectacular month for the old-economy index that is the Dow Jones, which saw it rally sharply even as the surge in the Nasdaq hit a wall.
The index has clocked up new record highs on both days of July trading, and active futures have pushed higher this morning. This is the kind of healthy action investors want to see, as different leadership emerges, while the weaker payroll report has restarted the ‘bad news is good news’ routine, since it helps to push back the dreaded idea of Fed rate hikes.
Chip stocks are being punished for sky high valuations, but the consolidation has yet to turn into anything more serious.”
The Stoxx 600 is set for its biggest weekly gain since mid-May.
European markets at record high
Stock markets across Europe are also rallying.
Germany’s DAX index has hit a record high, up 0.7%. And that’s helped to lift the pan-European Stoxx 600 index up by 0.35% to a new intraday high too.
The drop in the oil price in the last few weeks has lowered the risk that eurozone interest rates are raised further later this year.
FTSE 100 hits four-month high
Britain’s blue-chip stock index has hit its highest level since the first week of the Iran war this morning.
The FTSE 100 climbed as high as 10,701 points this morning, up 0.4%, its highest level since 3 March.
Precious metals miner Fresnillo (+2.5%), engineering firm Weir Group (+2%), and energy company SSE (+1.8%) are the top risers.
Several factor are lifting the ‘Footsie’, including hopes of a US-Iran peace deal which have pushed the oil price down (and could send it lower…)
A weaker-than-expected US employment report, released yesterday, has also cheered traders by dampening expectations of rises in US interest rates.
Dan Coatsworth, head of markets at AJ Bell, explained:
“Weak jobs numbers would normally be a key reason for central banks to consider cutting rates to stimulate the economy.
The latest US jobs data confirms labour market disappointment but we’re nowhere near the stage where the Fed will reach for the monetary policy scissors to start cutting. We’re more likely to see an adjustment to the Fed’s assessment that implies no change to rates, which is still a win for markets.
Thirdly, investors are ‘rotating’ out of chip stocks (following a stellar start to the year) and into ‘old economy’ companies instead, and there are plenty of those on the London stock market.
Chart: How oil fell back to pre-war levels
Voyages through the Strait of Hormuz have increased
Voyages through the Strait of Hormuz have more than quadrupled in the past week amid growing confidence in the US and Iran’s 60-day ceasefire, the Financial Times reports.
The number of traceable journeys by ships passing into and out of the Gulf each day has increased from between one and two for the majority of the conflict to eight on July 1, according to a moving seven-day average from maritime data platform Signal.
Also, the number of transits into and out of the Gulf including ‘dark voyages’ reached a total of 258 in the week to June 28, up from 41 in the first week of the crisis in March, according to data from Lloyd’s List Intelligence.
More here.
Introduction: Oil may fall to $60 a barrel, Citi says
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hopes of peace in the Middle East have been pushing oil down in recent weeks, and there could be further falls to come!
Analysts at Citigroup have predicted that Brent oil could fall to $60 a barrel by the end of the year, a level last seen in January. Brent has already fallen from $126/barrel at the end of April to $72 this morning, wiping out its jump after the Iran war began.
As Citi’s Francesco Martoccia puts it:
“Fundamentals are rapidly reasserting themselves.
Shipping flows are normalizing, Chinese buyers remain absent, physical crude markets have weakened sharply, and inventories have drawn far less than expected.”
Crude price have fallen following the resumption of flows through the strait of Hormuz, as the US and Iran try to agree a peace deal.
On Wednesday the two sides held a round of indirect talks in Doha, discussing maritime traffic in the Strait of Hormuz and unfreezing Iran’s funds.
Those talks have now been paused, as Iran holds a funeral ceremony for Ali Khamenei’s, the supreme leader who was killed on the first day of the conflict.
There is still the risk that the conflict re-escalates (as we saw last weekend when a new round of escalating strikes between Iran and the US rocked the region).
James Hosie, equity analyst at Shore Capital, warned that oil could push higher if the talks stalled, telling clients:
The current US-Iran ceasefire remains fragile after an Iranian drone strike on a Panama-flagged oil tanker last week was followed by both sides targeting regional military sites. At this stage, the attacks do not appear to have materially disrupted vessel owners’ willingness to navigate the Strait.
A return of blockades could cause a spike in Brent back above $100 per barrel, although we would anticipate markets pricing in such disruption with the assumption that it is very temporary and becoming a catalyst for further ceasefire talks.
A breakdown in diplomacy leading to a resumption of daily missile strikes between the US or Israel and Iran could result in a return to higher oil prices for a more sustained period.
The agenda
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9am BST: UN’s FAO Food Price Index
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9am BST: Eurozone service PMI report for June
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9.30am BST: UK service PMI report for June
