London midday: FTSE pops higher as investors await Iran's response to US strikes

(Sharecast News) - London stocks had popped into the black by midday on Monday as investors calmly awaited Iran's response to US strikes on Iranian nuclear sites over the weekend. The FTSE 100 was up 0.1% at 8,779.89, reversing earlier losses.

Russ Mould, investment director at AJ Bell, said: "The markets are not yet reacting with any degree of panic to the US airstrike on Iran's nuclear facilities as they await to see how Tehran responds.

"The promised two-week hiatus as the US weighed its decision didn't materialise as the Trump administration acted on Saturday. After briefly spiking above $80 per barrel when the market opened in Asia on Monday, Brent pared those gains to trade modestly higher.

"If Iran decided to block the Strait of Hormuz, through which a large proportion of the world's oil and liquefied natural gas passes, then energy prices could move substantially higher. That could hurt consumers and businesses around the world as it would push up the cost of energy, transport and raw materials.

"The double-digit energy price gains seen since Israel's first missile strike on Iran 10 days ago will have already had some inflationary impact."

On home shores, provisional data showed the economy picked up in June as both the service and manufacturing sectors strengthened.

The S&P Global flash UK PMI composite output index was 50.7 in June, up on May's 50.3 and staying above the 50.0 benchmark. It was also marginally ahead of consensus expectations of 50.5.

A reading below 50.0 suggests contraction, while one above it indicates growth.

Within that, the services PMI business activity index rose to a three-month high of 51.3.

Manufacturing remained in contraction. However, the output index increased to 47.1, while the flash PMI edged up to 47.7 from 46.4 in May, a five-month high.

Overall, new business volumes returned to growth - ending a six-month run of contraction - driven by the service economy. Inflationary pressures also eased.

However, manufacturers posted another export-led decline in order books, as Donald Trump's trade war, mounting geopolitical tensions and global price competition continued to weigh on demand.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The UK economy remained in a sluggish state at the end of the second quarter.

"Although business conditions have continued to improve, quelling recession fears, growth of business activity remains disappointingly lacklustre, indicative of second quarter GDP rising at only 0.1% quarterly pace."

However, he added there had been a "marked" cooling in inflationary pressures, especially in the service sector. Persistent inflation in the sector has long been a concern of the Bank of England's rate-setting Monetary Policy Committee.

"As such, the picture of near-stalled growth, falling employment and lower inflation opens the door for the BoE to cut rates again at its next policy meeting in August," Williamson said.

In equity markets, oil giants BP and Shell were among the gainers as oil prices rose.

Airlines took a hit from the prospect of higher fuel costs, however, with easyJet and BA and Iberia owner IAG both flying lower.

Elsewhere, Spectris surged as the supplier of precision instrumentation and controls said it has agreed to be taken over by private equity investor Advent in a £3.8bn deal.

KKR later put out a statement saying that it has been "engaging constructively" with Spectris' board since submitting its first proposal to buy the firm on 2 June. It said that while no revised proposal has been made, it is "actively engaged in the advanced stages of due diligence and arranging financing commitments".

Assura was little changed after the healthcare property firm accepted an increased £1.79bn bid from Primary Health Properties only days after recommending a £1.7bn final offer from private equity outfits KKR & Stonepeak.

Russ Mould said: "KKR needs to get its skates on if it serious about wanting to buy Spectris. Having been beaten by Primary Health Properties in the race to buy Assura, KKR won't want to lose a second takeover battle in the same day.

"Advent has struck a deal to buy Spectris at a chunky premium to the market value before bid interest was revealed earlier this month. Spectris' board has recommended the all-cash offer and it's now up to shareholders to vote on it. KKR has already expressed interest in Spectris and will need to make a formal offer fast if it stands a chance of derailing the Advent bid.

"The fact we've got two bid battles in Spectris and Assura just goes to show how the UK stock market continues to be on sale. If investors don't recognise the good value opportunities on offer, trade buyers or private equity firms will keep swooping on targets and pick them off one by one."

Market Movers

FTSE 100 (UKX) 8,779.89 0.06% FTSE 250 (MCX) 21,138.18 -0.05% techMARK (TASX) 5,036.17 0.36%

FTSE 100 - Risers

Convatec Group (CTEC) 293.00p 3.53% Bunzl (BNZL) 2,322.00p 2.20% Berkeley Group Holdings (The) (BKG) 3,866.00p 1.47% BP (BP.) 389.75p 1.31% Airtel Africa (AAF) 172.40p 1.29% Compass Group (CPG) 2,516.00p 1.25% Experian (EXPN) 3,810.00p 1.11% Sainsbury (J) (SBRY) 289.40p 1.05% Shell (SHEL) 2,710.50p 1.02% Intertek Group (ITRK) 4,690.00p 0.95%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 70.58p -3.21% easyJet (EZJ) 507.00p -2.31% Smurfit Westrock (DI) (SWR) 3,132.00p -2.28% Intermediate Capital Group (ICG) 1,898.00p -1.76% Flutter Entertainment (DI) (FLTR) 19,645.00p -1.70% Associated British Foods (ABF) 2,045.00p -1.54% Admiral Group (ADM) 3,378.00p -1.52% BAE Systems (BA.) 1,869.50p -1.50% Schroders (SDR) 360.00p -1.21% Entain (ENT) 837.20p -1.18%

FTSE 250 - Risers

Spectris (SXS) 3,780.00p 15.17% Oxford Nanopore Technologies (ONT) 124.20p 3.67% Target Healthcare Reit Ltd (THRL) 106.60p 2.90% Playtech (PTEC) 345.50p 2.83% SDCL Efficiency Income Trust (SEIT) 52.40p 2.34% W.A.G Payment Solutions (WPS) 83.00p 2.22% Victrex plc (VCT) 759.00p 2.15% NextEnergy Solar Fund Limited Red (NESF) 73.30p 1.95% Harbour Energy (HBR) 209.80p 1.94% Moonpig Group (MOON) 257.50p 1.78%

FTSE 250 - Fallers

Softcat (SCT) 1,794.00p -4.98% Aston Martin Lagonda Global Holdings (AML) 80.20p -4.75% Primary Health Properties (PHP) 99.50p -3.86% Frasers Group (FRAS) 663.50p -3.49% Dr. Martens (DOCS) 72.45p -2.82% Hays (HAS) 64.10p -2.66% Trainline (TRN) 276.40p -2.54% Workspace Group (WKP) 417.00p -2.46% Pets at Home Group (PETS) 255.20p -2.30% North Atlantic Smaller Companies Inv Trust (NAS) 381.05p -2.24%