London stocks fell on Thursday, giving back part of the previous session’s sharp advance, as a rebound in oil prices and fresh doubts over a fragile Middle East ceasefire damped appetite for risk.
The FTSE 100 slipped 0.3%, while the FTSE 250 dropped 1.1%, with retailers and smaller companies leading the declines.
The retreat followed a strong rally a day earlier, when London equities posted their biggest one-day gain in a year after the US and Iran agreed to resume diplomacy over the next two weeks.
That relief proved short-lived.
Investors quickly turned more cautious as uncertainty lingered over whether the truce would hold and whether energy flows through the region could again come under pressure.
Energy stocks outperform
Oil recovered from recent lows as traders assessed the risk that the ceasefire could unravel and disrupt supply routes in the Middle East.
The move lifted heavyweight producers and helped the FTSE 350 energy index rise about 1%, cushioning some of the broader market weakness.
For the FTSE 100, that offered a familiar source of support.
The benchmark has a relatively large weighting in oil and gas companies, which tend to outperform when geopolitical tensions drive crude prices higher.
Even so, gains in the sector were not enough to offset selling elsewhere as investors moved away from riskier and more UK-focused shares.
The broader tone across European markets was also softer, with the previous session’s rebound failing to gather momentum.
Investors were left balancing the benefit of stronger commodity prices for large-cap energy names against the wider economic risks posed by a renewed jump in fuel costs.
Higher yields weigh on domestic shares
Rate-sensitive sectors came under renewed pressure as gilt yields moved higher again, reversing some of the previous day’s decline.
Housebuilders were among the biggest fallers, leaving the sector down about 0.9% as investors reassessed the outlook for borrowing costs and housing demand.
Sterling strengthened and traders increased their expectations for Bank of England tightening by year-end, pricing in around 40 basis points of further moves compared with roughly 32 basis points a day earlier.
That shift added to the pressure on domestically exposed shares, particularly those tied to housing and consumer spending.
A monthly survey from the Royal Institution of Chartered Surveyors showed the UK housing market contracting sharply, underscoring the strain from elevated mortgage costs and weak sentiment.
For equity investors, the combination of higher yields and softer property activity created a difficult backdrop for companies reliant on the domestic economy.
Stock movers in focus
Among individual shares, Ceres Power Holdings slumped 6.4% after Peel Hunt cut its recommendation on the clean-energy technology company to sell from hold.
The downgrade added to pressure on a stock already facing scrutiny over the pace of commercial progress.
ME Group International was a notable bright spot, rising 3.2% after the vending machine operator said it had partnered with Asda to roll out more of its Wash.ME laundry units.
The update stood out in an otherwise cautious market and helped the stock buck the broader downtrend.
By the close, London equities were caught between two opposing forces: support from firmer oil prices and pressure from rising yields and geopolitical uncertainty.
Unless confidence in the ceasefire improves and bond markets stabilise, domestically focused parts of the market may remain under strain even as energy stocks continue to offer some support to the FTSE 100.
The post FTSE falls 0.3% as rising oil prices shake rate cut expectations appeared first on Invezz
