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Late market roundup: Middle East tensions drag global markets

Stocks in London ended lower on Tuesday as fading hopes for a ceasefire in the Middle East and weak US retail sales data dented investor confidence.

‘Middle East tensions are showing no signs of easing back, putting investors on high alert,’ commented Russ Mould at AJ Bell.

The FTSE 100 index closed down 41.19 points, 0.5%, at 8,834.03. The FTSE 250 ended 46.97 points lower, 0.2%, at 21,237.05, and the AIM All-Share fell 3.49 points, 0.5%, at 760.65.

The Cboe UK 100 closed down 0.5% at 880.75, the Cboe UK 250 ended 0.1% lower at 18,770.43, and the Cboe Small Companies declined 0.7% at 16,990.38.

In European equities on Tuesday, the CAC 40 in Paris closed down 0.8%, while the DAX 40 in Frankfurt gave up 1.1%.

Stocks in New York were lower at the time of the London close. The Dow Jones Industrial Average was down 0.2%, the S&P 500 index was 0.4% lower, as was the Nasdaq Composite.

Donald Trump called for a ‘complete give-up’ by Iran and denied pursuing a ceasefire in the war between the Islamic republic and Israel.

In comments after leaving the G7 summit early to focus on the conflict, the US president called for a ‘real end’ to the war rather than a temporary truce and predicted a further intensification of Israeli strikes.

Trump said on Air Force One that a satisfactory end to the war could consist of Iran ‘giving up entirely’ and added in a post on Truth Social on Tuesday that he had ‘not reached out to Iran for ’Peace Talks’ in any way, shape, or form’.

Vice President JD Vance said Tuesday that Trump may decide that ‘further action’ is needed to stop Iran’s nuclear program, responding to speculation that the US could intervene in the conflict.

‘The president has shown remarkable restraint in keeping our military’s focus on protecting our troops and protecting our citizens. He may decide he needs to take further action to end Iranian enrichment,’ Vance said in a post on X.

Ipek Ozkardeskaya at Swissquote Bank said ‘this is not a classic de-escalation story.’

‘While Iran appears to be signalling restraint, former President Donald Trump urged the evacuation of Tehran, and Israel has vowed to continue its strikes. This makes it a one-sided de-escalation at best, and keeps risks across energy markets and haven assets tilted to the upside. If Iran fails to find room to manoeuvre diplomatically, it could easily make a U-turn.’

Brent oil traded higher at $75.45 a barrel late on Tuesday from $72.79 on Monday.

The price rise boosted BP and Shell on London’s FTSE 100 by 1.8% and 1.5% respectively.

Elsewhere, US retail sales fell more than anticipated in May, data published by the US Census Bureau showed.

The country’s advance estimates of retail and food services sales edged down 0.9% monthly in May to $715.4 billion from $722.0 billion in April, when sales had declined by 0.1%. April’s figure was downwardly revised from growth of 0.1%. May’s contraction was sharper than a decline of 0.7% that had been pencilled in by the FXStreet-cited consensus.

The headline sales were dragged lower by a drop in motor vehicle and parts sales, noted economists at TD Economics.

‘A flurry of activity in anticipation of tariffs boosted consumer spending earlier this year, but that momentum is now looking to have run its course,’ the broker added.

The figures come ahead of Wednesday’s interest rate decision by the Federal Reserve.

According to the CME FedWatch Tool, it is near-certain that the Fed will maintain rates at the 4.25%-4.50% range this week. The Fed held in each of the first three meetings this year. Its last cut was in December, a 25 basis points trim to the federal funds rate range.

‘We expect a unanimous decision to leave rates unchanged and look for only cosmetic changes to the post-meeting statement,’ JPMorgan analysts said ahead of Wednesday’s decision.

JPMorgan expects the Fed’s projections this week ‘will likely push the growth and inflation outlooks in a stagflationary direction’, showing weaker growth and hotter inflation.

‘We expect the median estimate of GDP growth this year will be marked down from 1.7% to 1.4%, while the core PCE inflation forecast will be revised up from 2.8% to 3.2%. We expect more modest changes in the out years,’ JPMorgan added.

As for when the next change in the policy rate goes, JPMorgan expects the median dot-plot of policymaker projections to show only one cut in 2025.

‘For the out years, we project two cuts per year, which would put the ’27 year-end rate near neutral,’ JPMorgan added.

The pound was quoted down at $1.3502 at the time of the London equities close on Tuesday, compared to $1.3594 on Monday. The euro stood lower at $1.1522 against $1.1591. Against the yen, the dollar was trading at JP¥145.07, up compared to JP¥144.09.

The yield on the US 10-year Treasury was quoted at 4.42%, narrowed from 4.43%. The yield on the US 30-year Treasury was quoted at 4.93%, stretching from 4.92%.

On the FTSE 100, Ashtead rose 3.7% despite soft guidance accompanying ‘solid’ fourth-quarter and full-year results.

Pretax profit fell 6.0% to $392 million in the three months to April 30 from $417 million a year prior.

Adjusted pretax profit fell 3.6% to $430 million in the quarter from $446 million a year ago, beating consensus of $409 million.

Revenue declined by 3.8% to $2.53 billion in the quarter from $2.63 billion a year before, although rental revenue rose 0.9% to $2.33 billion from $2.31 billion.

Jefferies said the results were ‘solid enough’.

But guidance for between flat rental revenue and growth of 4% for the current financial year was softer-than-expected.

Peel Hunt suggested 2026 earnings forecasts could be lowered by 5%.

UBS said the outlook is slightly on the low side of consensus, meaning earnings momentum is therefore likely to remain under pressure for now.

Bunzl fell 3.1% as RBC Capital Markets downgraded it to ’sector perform’ from ’outperform’.

On the FTSE 250, Morgan Sindall soared 15% after it upgraded its profit view, amid strong trading in its Fit Out division.

The London-based construction and regeneration company said it expects group pretax profit for 2025 to be ‘significantly ahead of previous expectations’ as reported at its last update in May.

Morgan Sindall back in March predicted adjusted pretax profit ‘slightly ahead’ of consensus at the time of £178.0 million. In May, it said it was confident of delivering a full-year performance in line with expectations at the time.

Adjusted pretax profit in 2024 amounted to £172.5 million.

Gold was quoted lower at $3,381.51 an ounce against $3,403.81.

The biggest risers on the FTSE 100 were Ashtead Group, up 162.00 pence at 4,544.00p, BT, up 3.20p at 188.20p, BP, up 6.40p at 389.10p, Shell, up 38.50p at 2,664.00p, and Unite Group, up 10.50p at 844.50p.

The biggest fallers on the FTSE 100 were IAG, down 14.70p at 312.60p, Entain, down 31.00p at 835.00p, Bunzl, down 74.00p at 2,228.00p, WPP, down 15.00p at 531.20p, and easyJet, down 14.40p at 536.40p.

Wednesday’s global economic calendar has UK inflation figures and interest rate decisions in Sweden and the US.

The domestic corporate calendar on Wednesday sees full-year results from electronics retailer AO World and tools and equipment hire company Speedy Hire.

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