What you need to know
‘Tide is turning for unloved UK stocks’
One of London’s biggest fund management firms has told clients that unloved UK stocks have gone from “undervalued” to “unmissable” as it seeks to reverse the flood of redemptions draining the entire sector.
Ninety One Asset Management has launched a new campaign with wealth managers and investment platforms to try to erase the stigma which has led retail investors to pull about £40 billion from all UK equity funds in the past three years.
Tom Peberdy, managing director of Ninety One’s UK client group, said wealth managers, financial advisers and investment platforms, which advise end-clients on which funds to buy, were suddenly more willing to listen to the case for UK assets.
“There’s definitely a bit of a sentiment shift,” he said. “It was really easy to get people round the table,” he said of a recent sales pitch attended by, among others, Hargreaves Lansdown, St James’s Place and Rathbones. “It does feel like the tide is turning.”
Patrick Hosking, our financial editor, has more here.
Global fund managers sell the dollar
Global fund managers are going underweight on the dollar, a monthly survey by Bank of America has found.
The report found that investors were the most underweight in the dollar in 20 years. So far this year, the dollar has fallen 10 per cent against the basket of six currencies, including the pound and the euro.
However, fund manages said sentiment about equities had recovered to the “goldilocks bull” levels seen before President Trump’s so-called tariffs Liberation Day as trade war and recession fears abate.
They said there had been a “rotation to emerging markets energy, banks, industrials from defensives”.
Hold rates for now, says Times shadow MPC
The Bank of England should keep interest rates unchanged at its meeting on Thursday amid uncertainty about the inflationary fallout from the Israel-Iran conflict, The Times’ shadow monetary policy committee (MPC) has urged.
A majority of the nine shadow MPC panellists said the Bank should keep borrowing costs unchanged at 4.25 per cent as inflation is still elevated and there is volatility in oil prices, triggered by the escalation in tensions in the Middle East.
Eight shadow MPC members voted for no change, while one called for a 0.25 percentage point reduction, which would take rates down to 4 per cent, their lowest level since February 2023. Jack Barnett has more here.
UK shares join global sell-off
UK shares have joined a global sell-off as uncertainty about escalating tensions in the Middle East unsettled investors.
The FTSE 100 has eased back from earlier falls to trade down 31 points, or 0.35 per cent, at 8,844.22. Stock markets on the Continent are lower and Wall Street is forecast to open lower.
Bunzl, the distributor of toilet paper and disposable cups, was the biggest faller after RBC reduced its price target. Entain slid after rising yesterday. Airlines and heavily weighted financial stocks were also down.
BP and Shell were among the biggest risers after the oil price increased and Fresnillo, the gold miner, was up despite a fall in the price of gold. The Primark owner AB Foods was also higher.
The pound dipped against the dollar to $1.3564. Longer dated gilt yields rose but shorter-dated bonds yields fell.
Poundland to close 68 stores
Poundland is to close 68 shops and two warehouses across Britain as part of a restructuring under its new American owners, which puts hundreds of jobs at risk (Isabella Fish, retail editor, writes).
The struggling discount chain was bought for a pound last week by Gordon Brothers, the Boston-based investment company, from Pepco, a Warsaw-listed group that has owned it since 2016.
The new owners are seeking court approval for a restructuring plan to shut 68 shops and secure rent reductions on dozens more.
The retailer said it expects to end up with between 650 and 700 stores after the overhaul. At present, it runs about 800 stores across the UK and Ireland and has 16,000 employees. The company has not disclosed how many store workers will be affected.
Who will snap up TSB?
NatWest has been named as the most likely potential buyer for TSB by analysts at RBC Europe. The team reckon TSB’s Spanish owner, Sabadell, could put a price tag of about £2.6 billion on the British high street bank.
In a note to clients, RBC’s Benjamin Toms said: “The acquisition of TSB would help NatWest Group participate in UK consolidation, whilst increasing its market share in mortgages, where the bank is currently underweight.”
NatWest, Barclays, Santander UK and HSBC have all been named as potential bidders. Lloyd’s, which sold TSB in 2015, may struggle with market share concerns.
RBC’s analysts also note that the sale could help Sabadell fend off a takeover bid by domestic rival BBVA; adding: “We believe BBVA’s offer price will have made an assumption around offloading TSB shortly after completion for a profit. As a result, if SAB sells TSB, it could scupper the transaction.”
Oil rises on jitters over supply
The oil price has risen sharply this morning, with the benchmark Brent crude futures contract up 1.4 per cent to $74.28 per barrel on worries that the Israel-Iran conflict could spill over into the broader Middle East and hit global oil supply.
The concerns have also hit stock markets in Europe, with London’s FTSE 100, Germany’s DAX and France’s CAC 40 down 0.44 per cent, 1.3 per cent and 0.9 per cent respectively.
The International Energy Agency writes in its monthly oil report: “Iran has repeatedly threatened to close the key Strait of Hormuz if attacked. Closure of the strait, even for a limited period, would have a major impact on global oil and gas markets. The strait is the exit route from the Gulf for around 25 per cent of the world’s oil supply — including from Saudi Arabia, the UAE, Kuwait, Qatar, Iraq and Iran — and most of the world’s spare production capacity.”
Oil market ‘well supplied’ amid tensions
Global oil markets look “well supplied” this year, assuming no major disruption as a result of the Iran-Israel conflict, according to the International Energy Agency.
Oil supplies will jump this year to average 104.9 million barrels per day, outstripping demand that has been revised down to 103.8 million barrels per day, the IEA forecast.
“With supply exceeding demand, global observed oil inventories have risen by 1 million barrels per day on average since February, and by a massive 93 million barrels in May alone,” the Paris-based agency said in its monthly oil market report.
Oil prices jumped on Friday on fears Iran could block oil tankers through the Strait of Hormuz, a crucial shipping route, but prices have since receded on hopes the conflict will be contained.
Capita raises bet on AI
Capita is investing some of the proceeds of a £250 million cost-cutting programme into artificial intelligence.
The London-listed outsourcer — a contractor for the government and local authorities, which also manages the BBC licence fee — said it had so far stripped out £185 million of costs as part of its plans to save £250 million a year by the end of 2025.
Adolfo Hernandez, the chief executive, said customer interest in AI agent technology had “grown exponentially”. A new AI Catalyst Lab has identified more than 200 use cases across all business areas. Five AI products have launched, with another five in detailed testing. The company is using itself as “client zero” to test uses before rolling them out to customers.
Hernandez said: “We are reinvesting a portion of our efficiency savings into new technology solutions, particularly those underpinned by AI and we are focused on bringing these technology solutions to more clients,” he said.
The group is looking to improve profitability, with group sales down 4.5 per cent in the five months to May 31. Last year, it announced plans to cut about 900 jobs as part of the cost-reducing drive.
Sabadell considers sales of TSB
Banco Sabadell, the Spanish parent of TSB, is considering the sale of the UK high street bank as it weighs up possible offers.
The Spanish bank said in a regulatory filing that it received “preliminary non-binding expressions of interest for the acquisition of the entire share capital of TSB”.
Banco Sabadell, which paid £1.7 billion for TSB about a decade ago, is seeking to defend itself from being taken over by a rival, BBVA. TSB runs about 175 branches across the UK.
Morgan Sindall shares jump 15%
Morgan Sindall shares have risen 15 per cent to £44.20 after the construction company forecast that full-year pre-tax profits would be significantly ahead of previous expectations.
The company, which is the biggest riser in the FTSE 250, will announce its half-year results for the six months to June 30 on July 29.
Trading has been strong in its fit-out and construction businesses. It is the second uplift in its outlook since its results in February.
Tom Howard wrote in February: “The company enjoyed record profits last year as it cashed in on growing demand from businesses for better offices and the collapse of its rival. In some cases, people are spending more on upgrading their office than they did on building it in the first place.”
Risers and fallers as the markets open
The gold miners Fresnillo and Endeavour fell this morning despite safe-haven buying of the metal. The British Airways owner IAG fell on worries about fuel costs and geopolitical tensions.
The insurer Legal & General was lower before its investor deep-dive on asset management. The company said it expected group core operating profit to grow between 6 per cent and 9 per cent in 2025, in line with its three-year targets.
The rental equipment company Ashtead was the biggest riser in the FTSE 100 this morning, despite is warning about a slowdown in its main US construction market.
BP and Shell were also higher on concerns about supply due the conflict with Iran, a big Opec oil producer. Informa rose on its upbeat update.
Aviva ‘confident’ of green light on takeover
Aviva’s £3.7 billion cash and shares takeover of Direct Line is set to complete next month after “constructive” talks with the competition watchdog.
The FTSE 100 life insurance group said it was “confident” of receiving the all-clear for the deal when the Competition and Markets Authority reports back on its phase one investigation on July 10.
Aviva is pressing ahead with plans for a court hearing to sanction a July 1 completion of the takeover, first announced on December 23 last year.
The combined group will be a significant force in the motor insurance sector, estimated to cover more than a fifth of the total UK market.
The takeover has also caused concerns among workers at the two firms after Aviva revealed at the end of last year that about 2,300 jobs would be at risk.
UK and US agree trade deal
Sir Keir Starmer has agreed the start of a US trade deal with President Trump that will slash tariffs on British cars and aircraft parts within days.
Steel is not yet covered by the deal as talks continue to ensure all big producers are exempt from tariffs.
The prime minister called it a “very good day” after shaking hands with Trump on a deal that ends weeks of uncertainty for the automotive and aerospace industries.
Trump said the UK would be “very well protected” from tariffs “because I like them”.
FTSE opens down
The FTSE 100 has opened down 40 points, or 0.45 per cent, at 8,835.33, with concerns about increased tensions in the Middle East. The more UK-focused FTSE 250 dipped 12 points, or 0.06 per cent.
Brent crude, which was higher earlier on concerns over supply from Iran, was down 0.4 per cent at $72.96 a barrel. Earlier safe-haven buying of gold eased with the price flat at $3,385.09 an ounce. The pound was down against the dollar at $1.36.
Informa on track
In other corporate news this morning:
Informa: The FTSE 100 events and academic publishing group said it was on track to meet full-year expectations before its annual general meeting later this morning. The company reported underlying revenue growth of 9.3 per cent for the five months to May 31.
Morgan Sindall: The construction and infrastructure company expects full-year results for 2025 will be significantly ahead of its previous expectations. Trading has been strong in its fit-out and construction businesses. It is the second uplift in its outlook since its results in February.
Asos: The online fashion retailer has announced the departure of its finance director Dave Murray, who will leave the group at the end of this month. The retailer has appointed Aaron Izzard, his deputy at present, to succeed him.
Ashtead warns of weak US market
The FTSE 100 industrial equipment hire group has warned that rental revenue in the current financial year will slow to between 0 per cent and 4 per cent amid continued weakness in the US construction market.
The warning came as Ashtead posted full-year results that showed operating profits slipped 5 per cent to $2.12 billion, from $2.23 billion, in the 12 months to the end of April. Revenue fell 1 per cent to $10.79 billion from $10.85 billion as the company reported 4 per cent growth in group rental revenue.
Ashtead said it was on track to shift its primary listing to the US in the first three months of 2026. America accounted for 98 per cent of operating profits last year and is home to Ashtead’s Sunbelt rentals division.
Analysts at Jefferies said the results were “solid enough” and the cautious outlook was expected.
John Lewis poaches key Marks and Spencer executive
John Lewis has poached Anna Braithwaite, the former marketing director of Marks & Spencer, as its new chief customer officer. Braithwaite was a key figure behind the transformation of M&S.
Isabella Fish, retail editor, writes that the move signals renewed ambition in John Lewis’s attempt to win back the shoppers of middle England.
As chief customer officer, Braithwaite will oversee marketing and customer experience across all John Lewis channels. Her focus will be on reviving the brand’s core promise of quality, value and service. She will join John Lewis on October 1.
Uncertainty over Middle East unsettles investors
European markets are expected to open down after President Trump left the G7 early to return to Washington and urged Iranians to evacuate Tehran as fighting between Israel and Iran entered a fifth day.
Trump is also reported to have called the US national security council to be ready on his return.
The FTSE 100 is forecast to open 48 points, or 0.5 per cent lower, with stock markets in Germany and France expected to fall as investors move into safe-haven assets.
Gold rose close to $3,400 an ounce after dropping yesterday. The dollar strengthened and yields on US government bonds fell as investor bought Treasuries, traditionally a safe haven investment although recent events suggest their status may be shifting.
Brent crude gained 0.78 per cent to $73.77 a barrel on concerns about supply from Iran, a big Opec oil producer.
• For the latest on the Middle East tensions, follow here
Today’s top business news
1 Businesses intend to lay off staff and increase prices to deal with the £25 billion rise in payroll taxes announced by Rachel Reeves at the October budget, researchers have said. Of 500 owners of businesses, 33 per cent plan to reduce headcount, says a survey by Censuswide.
2 Oil prices receded and equities rose as traders bet that the Iran-Israel conflict would not escalate into a wider war. Reports that Iran is seeking a peace deal and evidence that oil supplies are unaffected reversed a sharp rally in crude prices.
3 The prospect of a takeover bid for Metro Bank sent shares in the lender surging to their highest in more than two years. The stock rose by 18.4 per cent after it was reported Pollen Street Capital, owner of Shawbrook Bank, made an approach.
4 German-owned Ensus, Britain’s biggest producer of carbon dioxide for use in operating theatres and food and drink, has threatened closure as a result of the US-UK trade deal.
5 Entain’s US betting and gaming joint venture raised full-year revenue and profit guidance. In a trading update, the group said “positive momentum” of BetMGM continued in the second quarter.
6 Jaguar Land Rover has downgraded its earnings forecast and cashflow expectations for this year. JLR said its profit margins in the year to March would come in between 5 per cent and 7 per cent.
