-- London's FTSE 100 closed 0.19% lower on Thursday as the lack of peace talks between the US and Iran increased the possibility of a protracted conflict and the closure of the Strait of Hormuz, while the latest economic data reignited fears of a tighter monetary policy.
Britain's private sector output growth accelerated in April, supported by modest rebounds in manufacturing production and in services activity, flash data from S&P Global showed. The flash UK PMI Composite Output Index hit a two-month high of 52 in April, compared with 50.3 in the previous month and the consensus of 49.8.
"The UK economy has gathered some renewed momentum in April after the initial impact of the war in the Middle East caused growth to stall in March, but the upturn comes with a catch," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "The improved rate of expansion is in part a reflection of a short-term boost from a rush to secure purchases ahead of feared price rises and supply shortages linked to the war."
"The unexpected rise in the UK PMIs suggests the economy may retain some momentum in Q2, but also that the Bank of England (BoE) may have to raise interest rates to lean against inflation," according to Berenberg. "The rise in the composite output PMI leaves it consistent with growth of 0.2% qoq, above our forecast for unchanged output (0.0%). However, the larger increase in the selling prices balance than in the eurozone coupled with mentions of strong wage pressures points to a higher risk of second-round effects (i.e. pay rises to keep pace with inflation) than we anticipated given the weak labour market backdrop."
In corporate news, J Sainsbury (SBRY.L), d/b/a Sainsbury's, posted annual growth in preliminary profit and revenue for fiscal 2026, with a warning that the Middle East conflict will weigh on both its customers and business. The British supermarket chain became one of the FTSE 100's worst performers, with shares down 3.68% at closing.
"FY25 was broadly in line with profits of GBP1,025m and [free cash flow] beat by +2.5%. Q4 trading was softer in grocery (-30 [basis-point] miss) at +4.5% but [general merchandise] outperformed and beat weak expectations. The problem is the guidance range of GBP975-1,075m which is below current consensus of GBP1,100m and therefore we will see consensus trend downwards," Bernstein said.