London midday: Stocks stay down, oil up amid US-Iran strikes

(Sharecast News) - London stocks were still sharply lower by midday on Thursday, with oil prices up after the US and Iran exchanged military strikes.

The FTSE 100 was down 1% at 10,395.98, while Brent crude was 2.2% higher at $96.40 a barrel after the US carried out fresh strikes on Iran, targeting a military cite in the port city of Bandar Abbas and shooting down four Iranian one-way attack drones.

Iran's Islamic Revolutionary Guard Corps (IRGC) said it had retaliated by targeting a US air base in Kuwait.

Meanwhile, Donald Trump said he wouldn't be rushed into a peace deal with Iran. At a White House cabinet meeting on Wednesday, the US President said he wasn't concerned about the potential political impaft of the conflict with Iran.

"They thought they were going to outwait me," Trump said, referring to Iran's leadership. "You know, 'We'll outwait ​him. He's got the midterms.' I don't care about the midterms."

Russ Mould, investment director at AJ Bell, said: "The optimism which has persisted for much of this week about the prospects for a deal between the US and Iran is being severely tested.

"A fresh exchange of strikes between the two countries is testing the fragile ceasefire and forcing a reassessment of the chances of a near-term agreement which can reopen the Strait of Hormuz and dial down the pressure the crisis is putting on the global economy.

"For now, oil prices remain out of the $100 per barrel danger zone but government bond yields are ticking higher and the FTSE 100 and other European markets followed Asian shares in chalking up material losses."

Looking ahead to the rest of the day, attention will turn to US inflation data for April, with the PCE - the Federal Reserve's preferred measure of inflation - due at 1330 BST.

Kathleen Brooks, research director at XTB, said: "Core PCE is expected to increase to 3.3% from 3.2% last month, headline PCE is expected to surge to 3.8% from 3.5% in March. A rise in the PCE rate is expected after the CPI rate surged to 3.8% for April. This is well above the Fed's 2% inflation target, and it should justify a shift in the Fed's stance from dovish to neutral/hawkish.

"Today's data could derail the stock market rally, particularly in the US and parts of Asia like South Korea, as it reminds the market that the war in the Middle East is causing real economic damage through higher interest rates. We could see yields pop higher later today, after a strong rally in global sovereign bonds over the last month."

In equity markets, shares of BT Group slumped following a report the UK government would oppose any attempt from Indian billionaire Sunil Bharti Mittal to increase his stake in the telecoms group.

Johnson Matthey fell as it announced the acquisition of Cormetech, a US manufacturer of selective catalytic reduction catalysts, for an enterprise value of $360m. The deal was announced alongside full-year results, which showed that operating profit was in line with previously-upgraded guidance.

Utilities provider SSE reversed earlier gains to trade lower as it reported a small decline in annual profits but adjusted earnings at the upper end of guidance.

Molten metal flow engineer Vesuvius was under the cosh as it said revenue and trading profit over the first four months of the year were slightly ahead of last year on a constant currency basis, and backed its expectations for the full year.

The losses were likely due to the fact it was trading ex-dividend, along with a host of other stocks including Kingfisher, National Grid, Severn Trent, AB Foods, Hilton Foods and Breedon.

On the upside, defence firms Babcock, BAE Systems and Melrose were among the top performers.

PPHE Hotel surged after saying it had received a £22 per share takeover proposal from Israel's Fattal Hotel Group which it deems to represent fair value.

Computacenter gained after saying it had bought Government Acquisitions (GAI), a value-added reseller focused on the US federal government market, for up to $92m.