London midday: FTSE edges higher as bond markets stabilise

(Sharecast News) - London stocks had edged higher by midday on Thursday as bond markets stabilised, and as investors continued to mull developments in the Middle East conflict.

The FTSE 100 was 0.3% firmer at 10,783.05, while Brent crude was up 1.9% at $97.42 a barrel and West Texas Intermediate was 2.1% higher at $92.90.

In bond markets, the yield on the 10-year gilt was down four basis points at 5.20% and the yield on the 30-year gilt was three basis points lower at 5.83%.

As far as Middle East developments are concerned, US President Donald Trump told reporters at the Oval Office on Wednesday that the US was prepared to launch another attack on Iran at "any time".

"We took out all of the new equipment that they tried to build along the Strait of Hormuz - some defensive, some offensive," he said. "It was a very heavy attack last night, and we're prepared to do another one any time we want." Trump also said that a renewed campaign would not last "too long".

Russ Mould, investment director at AJ Bell, said: "A measure of calm in government bond markets and a slight moderation in oil prices helped steady markets in Asia overnight and saw the FTSE 100 start out flat on Thursday morning.

"The threat of further escalation in the Middle East continues to hum a discordant tune in the background though amid continuing nervousness about the implications for inflation and the cost of borrowing.

"AI chip giant Broadcom may have announced another blowout set of quarterly numbers but the indifferent market reaction shows just how demanding the market is of AI names thanks to their gravity-defying valuations. Third-quarter and guided fourth-quarter revenue did come in ahead of expectations but only by a smidge."

On home shores, a survey showed the services sector grew in August at the fastest pace since April, but cost pressures ramped up. The S&P Global services PMI business activity index rose to 52.5 from 52.1 in July. A reading above 50 indicates expansion, while a reading below signals contraction.

The survey also showed that employment numbers fell at the slowest pace since October 2025, helped by improved order books and more optimism towards the business outlook. However, a number of firms reported ongoing hiring freezes due to strong cost pressures and excess business capacity, with some also commenting on efforts to boost productivity through automation.

S&P Global said service sector workforce levels have now fallen for 23 months in a row, which is the longest continuous period recorded since the survey began in July 1996

Tim Moore, economics director at S&P Global Market Intelligence, said: "August data highlighted improving operating conditions across the UK service economy. Business and consumer spending saw further gains after declining during the second quarter of 2026, which led to the fastest expansion of output levels since April.

"Service providers are increasingly optimistic about the year ahead business outlook, with confidence levels now close to those seen just prior to the Middle East conflict. However, business activity growth projections were still subdued in comparison to long-run trends amid lingering worries about inflationary pressures and geopolitical tensions.

"Higher fuel prices and transportation bills reignited overall input cost inflation in August. Moreover, the rate of output charge inflation in the service sector also accelerated for the first time in four months as businesses sought to protect their margins from suppliers' price hikes.

"Many firms have responded to intense cost inflation by tightening their staff recruitment policies. This trend continued in August, but signs of a turnaround in sales pipelines and broader market conditions led to the slowest pace of job losses since October 2025."

In equity markets, Hilton Foods surged after lifting its full-year profit guidance, as it hailed a good interim performance from core meat and fresh prepared food, but weakness in the Foppen business. It now expects full-year adjusted profit before tax from continuing operations of between £66m and £71m, up from previous guidance of £60m to £65m and reflecting the removal of Dalco losses and favourable FX.

Dunelm rallied as Deutsche Bank upgraded the homeware retailer to 'buy' from 'hold' ahead of its strategy update. It reckons management will outline a revamped digital offer and increased store investment to drive accelerating earnings growth as Dunelm progresses towards 10% market share. DB also hiked the price target to 1,050p from 850p.

On the downside, Grafton Group lost ground as it held on to its full-year earnings guidance after a solid first half, while investment manager M&G was weaker after saying it swung to a first-half loss after tax.

Crest Nicholson tumbled after warning it now expects a full-year loss and cutting its guidance for completions as it said market conditions have been more subdued than expected over the summer.

Admiral, Aviva, Hammerson, Rathbones, Vesuvius and Ithaca fell as they traded without entitlement to the dividend.