London midday: FTSE nudges lower as peace deal remains elusive; easyJet surges

(Sharecast News) - London stocks were a touch lower by midday on Monday after the US and Iran exchanged strikes over the weekend, and as data showed that UK house prices fell in May for the first time this year.

The FTSE 100 was down 0.1% at 10,398.49, while Brent crude was 3.4% higher at $94.20 a barrel.

The US said it launched "self-defence" strikes on Iranian drone sites over the weekend, while Iran's Islamic Revolutionary Guard Corps (IRGC) `said it launched a retaliatory strike on an airbase linked to a US attack.

Meanwhile, US President Donald Trump in a post on Truth Social that "Iran really wants to make a deal, and it will be a good one for the USA".

"Just sit back and relax, it will all work out well in the end - It always does!" he said.

Kathleen Brooks, research director at XTB, said: "Even though there have been attacks from both sides, the market is holding onto the fact that negotiations are ongoing, and an elusive Iran/ US deal to end the war in the Middle East and to reopen the Strait of Hormuz will still be found.

"As the focus switches to a raft of macro releases later this week, investors will need to watch how this plays out, and any delay in reaching a deal could knock market sentiment.

"Financial markets are clearly leaning towards a deal getting done, but the crisis has now entered its fourth month.

"The latest reports suggest that President Trump has demanded changes to the latest Memorandum of Understanding, which could lead to more negotiations over the coming days, meaning that a potential deal may not come until late this week. However, markets seem to have infinite patience when it comes to this conflict ending."

On home shores, a survey showed the manufacturing sector grew in May at the fastest pace in four years.

The S&P Global manufacturing purchasing managers' index rose to a four-year high of 53.9 from 53.7 in April, remaining above the 50.0 mark that separates contraction from expansion for the seventh month in a row.

All five of the PMI sub-components - new orders, output, employment, suppliers' delivery times and stocks of purchases - were at levels normally consistent with an improvement in operating conditions for the first time since May 2022.

Manufacturing output rose for the second month in a row, led by expansions in the intermediate and investment goods industries, while consumer goods output fell slightly.

That said, S&P said there are signs the recent growth acceleration could be short-lived as some manufacturers noted that clients were front-loading purchases to mitigate expected price rises and supply chain disruption.

The survey showed there was "substantial" pressure on both input prices and supply chains in May. The rate of increase in purchasing costs accelerated to a near four-year high, reflecting higher prices for chemicals, electronics, energy, foodstuff, fuels, plastics, metals, packaging, paper and timber. Manufacturers also pointed to the Middle East conflict, commodity market gyrations, geopolitical woes, supply chain issues, material shortages, tariffs, rising labour costs and higher taxes.

Rob Dobson, director at S&P Global Market Intelligence, said: "May saw the UK manufacturing upturn gather pace, as growth of production and business optimism both rose to three-month highs.

"The sustainability of the upturn remains in doubt, however. The recent upturn in new order intakes that is driving the expansion in output is heavily reliant on both manufacturers and their clients front-loading purchases to mitigate expected war-related price increases and supply chain disruption. This bounce will fade once customers have built up sufficient safety stocks.

"These price and supply factors are also having a direct impact on manufacturers, with cost inflation rising to a near four-year high and pressure on supply chains leading to material shortages and longer lead times. This will continue to constrain manufacturers and put growth at risk for as long as geopolitical uncertainty, war in the Middle East and risks to key transport routes such as the Strait of Hormuz continue to pose a threat."

Investors were also mulling industry data showing that house prices fell for the first time this year in May, as weakening consumer sentiment and rising costs weighed on the market.

In equity markets, defence firms Babcock and BAE Systems were among the worst performers on the FTSE 100, while Chemring and Qinetiq also lost ground.

EasyJet surged after US investment firm Castlelake announced late on Friday that it was in the early stages of considering a possible offer for the budget airline.

EasyJet said on Monday that it is not in talks with Castlelake and that any bid would be "highly opportunistic", given the fact that its share price is "temporarily depressed" due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices.

Under UK takeover rules, Castlelake has until 1700 BST on 26 June to announce a firm offer or walk away.

Bluefield Solar Income Fund surged after agreeing to be bought by Drax in a cash deal worth about �548m.

Applied Nutrition shot higher as it lifted its revenue expectations for the year, while Halma rallied after Goldman Sachs reiterated its 'buy' rating on the shares and lifted its price target.

Market Movers

FTSE 100 (UKX) 10,398.49 -0.10%

FTSE 250 (MCX) 23,410.65 -0.06%

techMARK (TASX) 6,040.23 -0.52%

FTSE 100 - Risers

Entain (ENT) 552.40p 3.37%

The Sage Group (SGE) 868.80p 3.09%

JD Sports Fashion (JD.) 86.28p 2.47%

BP (BP.) 525.70p 2.08%

Halma (HLMA) 4,776.00p 2.01%

Sainsbury (J) (SBRY) 301.40p 1.86%

Antofagasta (ANTO) 4,167.00p 1.78%

Tesco (TSCO) 436.50p 1.49%

Glencore (GLEN) 580.00p 1.47%

Anglo American (AAL) 4,041.00p 1.38%

FTSE 100 - Fallers

Babcock International Group (BAB) 1,066.00p -2.83%

BAE Systems (BA.) 1,968.00p -2.77%

Games Workshop Group (GAW) 19,750.00p -1.79%

Compass Group 11 (CPG) 31.70p -1.71%

Weir Group (WEIR) 2,422.00p -1.70%

Convatec Group (CTEC) 199.00p -1.63%

ICG (ICG) 1,839.00p -1.45%

BT Group (BT.A) 205.80p -1.44%

Rolls-Royce Holdings (RR.) 1,318.00p -1.33%

Haleon (HLN) 332.30p -1.31%

FTSE 250 - Risers

Bluefield Solar Income Fund Limited (BSIF) 91.30p 15.86%

Applied Nutrition (APN) 261.50p 7.08%

easyJet (EZJ) 434.00p 5.95%

Aston Martin Lagonda Global Holdings (AML) 46.56p 4.00%

Baillie Gifford US Growth Trust (USA) 356.50p 3.61%

Harbour Energy (HBR) 270.40p 3.13%

W.A.G Payment Solutions (EWG) 113.60p 2.88%

Greencoat UK Wind (UKW) 103.70p 2.88%

Softcat (SCT) 1,786.00p 2.82%

Schroder Asia Pacific Fund (SDP) 867.00p 2.36%

FTSE 250 - Fallers

Pan African Resources (PAF) 122.90p -10.60%

Ocado Group (OCDO) 212.40p -5.11%

AEP Plantations (AEP) 1,656.00p -4.72%

C&C Group (CDI) (CCR) 96.10p -3.90%

Serco Group (SRP) 256.60p -2.88%

Chemring Group (CHG) 533.00p -2.73%

QinetiQ Group (QQ.) 490.20p -2.64%

Ceres Power Holdings (CWR) 826.50p -2.13%

Mitie Group (MTO) 175.10p -1.96%

WPP (WPP) 276.20p -1.92%