British equities began the new week lower, with the FTSE 100 closing 0.59% in the red on Monday, as escalating tensions between the US and Iran depressed global markets and dampened the prospects of further peace talks.
"The Middle East conflict escalated early this morning as the US intercepted an Iranian cargo ship trying to breach its maritime blockade, prompting Iran to vow retaliation. The prospects for a second round of negotiations remain uncertain ahead of the ceasefire's expiration on Tuesday, with Iran refusing to participate unless the blockade is lifted," Danske Bank said.
In the UK, consumer confidence weakened further in April as households' inflation worries grew due to the ongoing war in the Middle East and rising expectations about monetary policy tightening from the Bank of England. The S&P Global UK Consumer Sentiment Index fell to a 33-month low of 42.3 in April from 44.1 in March, according to a survey by S&P Global.
Next, investors will assess labor data on Tuesday, inflation on Wednesday, S&P Global PMIs on Thursday, and retail sales on Friday. "Headline inflation should rise from 3.0% in February to 3.3% in March due to higher energy prices. In turn, core inflation is likely to move up from 3.2% to 3.3% with services inflation rising from 4.3% to 4.4% and core goods flat at 1.3%. We expect the unemployment rate to be flat at 5.2% in the three months to February with an 80K increase in 3m/3m employment," BofA Global Research said.
In corporate news, Tesco (TSCO.L) gained 1.62% to the FTSE 100's top risers list as Deutsche Bank Research raised the retail giant's price target to 5.25 pounds sterling from 5 pounds, with a buy rating.
"Tesco delivered another profit beat in FY26 but set out a cautious outlook for FY27, underlining an intention to defend value amid macro uncertainty. We view this as conservative (DBe at the upper end of the profit range). While there are risks to the UK consumer and inflation, Tesco is well placed to navigate this supported by its defensive profile, strong competitive position, incremental profit streams to drive price re-investment, and a track record of over-delivering," analysts said.
On the contrary, Deutsche Bank reduced the price target for Barratt Redrow (BTRW.L) to 3.66 pounds from 4.54 pounds, with a buy rating. The residential property developer was down 4.37% to become one of the worst performers on the blue-chip index.
"Barratt's Q3 update showed a resilient sales rate, marginally up y/y - supported by competitive pricing and incentives, and so far unaffected by the Middle East war and higher mortgage rates. Whilst demand could yet be impacted, a greater certainty is that cost inflation will rise, and we are already seeing evidence of this. To reflect this and the possibility that a weaker year-end order book will inhibit volume growth in FY27, we reduce our [pretax profit] forecasts by 3/18/18% for FY26/27/28 - albeit acknowledge there is a wide range of potential outcomes," analysts said.