FTSE 100 Live: Stocks to open lower as oil prices stabilise
Bryn Jones, head of fixed income at Rathbones, notes that UK government bonds have been more heavily impacted by recent market turbulence than European government bonds and US Treasuries.
"It has seemingly got worse since the start of the recent conflict. We had expected a rise in yields, but the moves have been aggressive. They took futures from two rate cuts to one rate hike in the space of a week, which is exceptional behaviour from a G7 government bond market.
"But then there have been exceptional events going on in Middle East. Then to see that rate hike disappear in the next few hours, back to ‘no change’ in rates – that’s a lot of volatility.”
Jones says he still sees longer-dated bonds as attractive, but fundamentals are "being questioned", with concerns that the UK will be impacted by the inflation caused by higher oil prices, adding to this negative loop.
"A long, protracted war will have a negative impact on longer term inflation, hence why we have seen yields rise. It is difficult to predict President Trump’s behaviours, comments and moves and this ‘Trump Bingo’ has been going on for a while.
"The front end has also seen some aggressive repricing. If you think the inflation fed through is not going to be that bad, and a conclusion to this trouble is forthcoming, then clearly there could be a lot of value."
9.16am: FTSE and European stocks well down
The FTSE 100 extended its losses as the first hour of trading wore on, and has now plummeted 111 points to 10,301.
European markets are broadly lower, with Germany's DAX down 1.6%, with slightly smaller declines in Paris, Milan and Madrid.
Biggest fallers on the Euro Stoxx 600 include healthcare names, financials and defence stocks, with Legal & General, CVC Capital Partners, Rheinmetall and Saab retreating alongside declines in industrials such as Smiths Group and Sunbelt Rentals.
The energy market is a key focus, says market analyst Victoria Scholar at Interactive Investor, but oil prices are "relatively subdued so far", with Brent crude trading just shy of $90 a barrel.
"Even after Tuesday’s declines, Brent crude is still up around 45% so far this year, reflecting the Iran war and the geopolitical uncertainty," she notes.
Neil Wilson at Saxo says that yesterday’s relief rally on comments from Donald Trump about the Middle East war ending “very soon” has evaporated.
He says this reflects oil prices remaining volatile and risk sentiment fragile, with trading based on the headlines from the rapidly evolving conflict in the Middle East.
"We've seen selling pick up in pace through the first hour of trade in Europe, signalling risk is off today."
He highlights some confusion about whether the US had successfully escorted a ship through the Strait of Hormuz, which is currently all but closed to shipping.
"Secretary of Energy Chris Wright claimed the US Navy had successfully escorted a tanker through the Strait – a claim the White House quickly quashed, which caused oil prices to rise and faded some of the stock market’s rally yesterday."
US futures are flat this morning but Oracle’s earnings beat sent shares up almost 10% afterhours, which he says "should help feed into tech rotation".
8.27am: Why is L&G being sold?
Let's look at why L&G shares are leading the fallers despite that record buyback.
It was a "solid set of results, broadly in line with our estimates at the operating level," says analyst Andreas Van Embden at Peel Hunt.
However, he says a "higher-than-expected investment variances meant a 4% miss in NAV (including CSM)", in other words net asset value was lower than forecast due to a larger gap between assumed and actual returns on the group's investment portfolio.
Van Embden says the outlook remained positive, with L&G stating that it is on track to meet its targets, with guidance for core operating EPS growth at the top end of the 6-9% range in 2026, while retail and bulk annuities pipelines are healthy.
Abid Hussain at Panmure Liberum says: "Overall, the numbers look fine year-on-year but appear to have generally missed or be in line with expectations."
He adds: "The capital position remains strong with a Solvency II capital coverage of 203%, although a material miss versus expectations driven primarily by negative market movements."
8.15am: FTSE 100 opens steeply lower
The FTSE 100 has plunged 80 points in opening trades to just below 10,332, led by Legal & General.
Despite launching its largest ever share buyback, the life insurer's shares are down 5.7% in initial trading.
Looking at the index's largest 20 companies, all but one is in the red, with HSBC, Rolls, BAE, Barclays, Antofagasta and Stna CHart all down around 1% or more.
7.58am: Balfour Beatty ups buyback and dividend
Another buyback, this one from Balfour Beatty of £200 million, accompanied by a 12% hike to its full-year dividend as the construction and infrastructure group reported a fifth consecutive year of earnings growth and an order book swelling to record levels.
Underlying profit was up 16% to £293 million on revenue up 8% to £10.8 billion, with UK power transmission and US buildings demand the key growth drivers.
New chief executive Philip Hoare, who joined in September, said the group's capabilities and disciplined approach to risk provided "a powerful foundation for the future," and guided for further profitable growth in both 2026 and 2027.
7.44am: L&G launches largest buyback
Life insurer Legal & General has launched its largest-ever share buyback of £1.2 billion and said it is aiming to "accelerate momentum" after being "reshaped" in the last year or two.
Core operating profits rose 6% to £1.6 billion, in line with forecasts.
CEO Antonio Simões said L&G was "a sharper, more focused business" following a year of restructuring, and pointed to the buyback alongside guided dividend per share growth of 2% as evidence of confidence in the group's trajectory, with total planned shareholder returns of £2.4 billion over the next year and more than £5 billion targeted between 2025 and 2027.
"We are on track to achieve the financial targets set out in our strategy," he said, "our priority now is to accelerate this momentum, maintaining discipline and delivering enhanced shareholder returns."
7.25am: Oil prices rule the market mood
Oil prices have become the most important ingredient of market sentiment this week, says market analyst Ipek Ozkardeskaya at Swissquote.
Brent and WTI prices reversed their big rise again yesterday after the International Energy Agency (IEA) announced that it could release a record amount of strategic reserves.
Though the exact amount has not been disclosed yet, it will reportedly be more than the 182 million barrels released after Russia’s invasion of Ukraine in 2022.
"But that amount remains meagre compared with the roughly 45 million barrels that IEA/OECD countries consume every day. It would therefore be a temporary fix," says Ozkardeskaya.
"The announcement is helping keep oil prices in check this morning, but the Middle East is now pumping less oil – around 6% less – in reaction to the Iran war.
"The duration of the conflict will determine whether the spike in oil prices is over, or whether there is more to come.
"Oil prices have therefore become the most important ingredient of market sentiment.
"If the war ends and the worst – in terms of an energy price spike – is behind us, investors could return to a more constructive mode. But uncertainties loom, and there is a chance that the Iran war will not be done and dusted quickly.
"For now, thanks to cooling upside pressure in oil prices, investors are scaling back the early-week jump in inflation expectations, which is helping support equities and bonds.
"Market volatility is easing and the US dollar is giving back ground against most major currencies. But restoring confidence will take time and require supportive data. And by supportive data, I primarily mean reasonable inflation numbers in the weeks ahead."
Today brings US CPI, for instance, though this is backwards-looking for February, before any of the energy pressures of the past week and a half.
7.16am: FTSE 100 predicted to open lower
The FTSE 100 has been predicted to start around 18 points lower on Wednesday as the Iran conflict seemed to intensify overnight, though oil prices remained below recent highs.
Yesterday, the London index leapt almost 163 points to 10,412, rebounding from a steep fall at the start of the week.
US stocks were patchy and largely flat overnight, with the Dow Jones falling 34 points or 0.07% and the S&P 500 dropping 0.2%, while the Nasdaq Composite closed just one point above flat.
Asian markets are mixed this morning, with Japan’s Nikkei 225 up 1.4% and South Korea’s Kospi gaining 1.4%, while Hong Kong’s Hang Seng was little changed and India’s Sensex fell 1.1%.
Brent crude stands at $87.55 a barrel, with WTI at $83.58, both well below the $100-plus seen at the start of the week.
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