London open: FTSE slumps as US-Iran peace hopes fade, amid UK political woes

(Sharecast News) - London stocks slumped in early trade on Tuesday as hopes of a peace deal between the US and Iran faded, and as UK prime minister Keir Starmer was set to hold a cabinet meeting among growing calls for him to quit.

At 0825 BST, the FTSE 100 was down 1% at 10,165.69, while Brent crude was up 2.2% at $106.48 a barrel.

Sentiment took a hit after US president Donald Trump told reporters at the White House that the ceasefire with Iran was on "massive life support".

Danske Bank said: "Trump is reportedly meeting his national security team to consider next steps, including a possible resumption of military action and a renewed naval mission in the Strait of Hormuz.

"The conflict is also likely to be on the agenda when he meets President Xi Jinping this week."

On home shores, borrowing costs surged as Starmer was due to hold a crucial cabinet meeting after more than 70 MPs called for him to quit following Labour's crushing defeat in the local elections.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "The potential for a fiscally looser successor may be weighing on rate expectations, but the inflationary influence of higher-for-longer oil prices is likely to be the bigger driver. With 10-year gilts now paying just over 5%, any movements in the yield will be closely monitored."

Looking to the rest of the day, investors will turn their attention to the US consumer price index for April at 1330 BST. The CPI print is expected to show core inflation accelerating to 2.7% from 2.6% in March, and a bigger jump in headline prices from 3.3% to 3.7%, which includes energy costs.

"The risks are skewed to a hotter-than-expected increase in prices, and while headline numbers may not move the dial, a higher-than-forecast core number could at least put a temporary brake on market optimism," said Derren Nathan.

In equity markets, banks were under the cosh, with Barclays and Standard Chartered among the worst performers.

Vodafone lost ground despite saying it swung to a full-year pre-tax profit, while Imperial Brands was little changed as the tobacco company backed its full-year outlook and posted an uptick in first-half revenues, but warned that if the conflict in the Middle East persists, it could have a more meaningful impact on costs and consumer demand.

Wickes fell as it said like-for-like revenue dipped 0.1% in the 17 weeks to 25 April as DIY sales were hit by poor weather.

Trustpilot was under pressure after Morgan Stanley downgraded the shares to 'equalweight'.

On the upside, Intertek surged as Swedish private equity firm EQT lifted its takeover approach for the inspection, product testing and certification group to £60 per share from £58.

Bakery chain Greggs rallied as it held annual guidance and said like-for-like sales in the first 19 weeks of the year had improved against what remained a challenging market hit by weak consumer confidence and the Iran war.

LFL sales rose 2.5% during the period with cost inflation still expected to be 3%, the company said in a trading update. However, it warned that should the war become prolonged the food retail industry "will likely see higher overall cost inflation through the end of 2026 and into 2027".

Market Movers

FTSE 100 (UKX) 10,165.69 -1.01%

FTSE 250 (MCX) 22,638.57 -0.74%

techMARK (TASX) 5,914.54 0.00%

FTSE 100 - Risers

Intertek Group (ITRK) 5,230.00p 4.82%

BP (BP.) 546.70p 1.35%

International Consolidated Airlines Group SA (CDI) (IAG) 416.10p 0.61%

DCC (CDI) (DCC) 5,760.00p 0.35%

Unilever (ULVR) 4,195.00p 0.19%

British American Tobacco (BATS) 4,366.00p 0.16%

Reckitt Benckiser Group (RKT) 4,537.00p 0.15%

Coca-Cola Europacific Partners (DI) (CCEP) 6,795.00p 0.07%

Next (NXT) 12,715.00p 0.00%

Antofagasta (ANTO) 3,913.00p 0.00%

FTSE 100 - Fallers

Barclays (BARC) 411.10p -4.19%

Vodafone Group (VOD) 114.45p -1.87%

Standard Life (SDLF) 743.00p -1.83%

Autotrader Group (AUTO) 500.40p -1.80%

Informa (INF) 781.00p -1.78%

Aviva (AV.) 618.60p -1.78%

Standard Chartered (STAN) 1,824.50p -1.66%

Pershing Square Holdings Ltd NPV (PSH) 4,084.00p -1.63%

Metlen Energy & Metals (MTLN) 36.59p -1.60%

Babcock International Group (BAB) 1,013.50p -1.59%

FTSE 250 - Risers

Greggs (GRG) 1,607.00p 6.31%

Bytes Technology Group (BYIT) 319.40p 4.84%

FirstGroup (FGP) 172.80p 4.41%

Man Group (EMG) 274.20p 2.00%

Pantheon International (PIN) 382.00p 1.98%

Oakley Capital Investments Limited (DI) (OCI) 468.50p 1.96%

Wizz Air Holdings (WIZZ) 1,014.00p 1.68%

RHI Magnesita N.V. (DI) (RHIM) 2,820.00p 1.44%

Gamma Communications (GAMA) 910.00p 1.41%

Inchcape (INCH) 816.00p 1.22%

FTSE 250 - Fallers

Trustpilot Group (TRST) 247.20p -5.98%

Wickes Group (WIX) 185.60p -5.12%

Kier Group (KIE) 204.40p -3.41%

THG (THG) 30.54p -2.75%

Ocado Group (OCDO) 188.30p -2.40%

SSP Group (SSPG) 159.30p -2.39%

TBC Bank Group (TBCG) 4,506.00p -2.17%

Chrysalis Investments Limited NPV (CHRY) 79.00p -2.12%

Kainos Group (KNOS) 792.50p -2.04%

Currys (CURY) 125.10p -1.79%