London open: FTSE nudges lower ahead of busy week; oil prices fall

(Sharecast News) - London stocks nudged lower in early trade on Monday at the start of a busy week that includes a raft of central bank policy announcements, the US midterm elections and the US non-farm payrolls report.

At 0830 GMT, the FTSE 100 was down 0.1% at 10,715.28, while Brent crude was 3.2% lower at $109.82 a barrel and West Texas Intermediate was off 3.6% at $100.39 amid reports the US and Iran are seeking diplomatic options to end the conflict in the Middle East.

But Angeline Ong, senior technical analyst at IG, said the drop in oil prices is a technical pullback, not a change in fundamentals.

"Supply is still tight as the market counts down to Tuesday's US midterms. A positive US reply to Qatar's two-day plan would ease the war premium and likely be a positive for airlines and negative for oil majors in the near terms," she said. "The real risk is a deal that is announced but not honoured."

Still to come on Monday's macro calendar, S&P Global's UK manufacturing PMI for October will be released at 0930 GMT.

Looking to the rest of the week, the BoE is widely expected to raise interest rates by 25 basis points to 4% on Thursday. This would mark the first move in the base rate of 2026. Kathleen Brooks, research director at XTB, said: "After a bland budget last week, which failed to spook the bond market, the Bank of England is likely to hike rates on Thursday.

"The market expects a rate hike and there is a near 100% chance priced in for later this week. There is also a 60% chance of a hike in February and more than a 50% probability of a further hike in March.

"Whether or not we see further hikes after December will depend on the outlook for the oil price. If there is any chance of a resolution to the war in the Middle East then we could see energy prices fall and with that the odds of more rate hikes from the BOE and other central banks. For now, geopolitics are the main driver of rate hikes in the UK and elsewhere, and until the outlook changes, rate hikes will remain on the agenda, which could pressure bond prices but may boost the pound.

"The commentary from the BOE is also worth watching later this week. While there are noted hawks at the bank who have been calling for a rate hike for months, it is worth watching the number of dissenters on Thursday. Also, the governor has been concerned about second round effects from inflation, but private sector wage growth remains subdued. If the Governor references this, it could suggest that the bar to further hikes in Q1 are higher than initially thought, which may weigh on the pound."

Rate decisions are also due from the Reserve Bank of Australia, Riksbank and Norges Bank.

In equity markets, Ithaca Energy, BP and Shell gushed lower as oil prices fell.

Building products group Ibstock tumbled as it cut its full-year profit outlook after a sharp deterioration in UK brick demand, with market volumes falling around 17% year-on-year in July and August. The company now expects adjusted EBITDA in the mid-£40m range, "materially below previous expectations", after weaker sales and production cuts put further pressure on profitability.

On the upside, FirstGroup rallied as it agreed to sell five West Yorkshire depots and 330 buses to WYCA for £109m, generating an expected post-tax gain of about £30m and cash proceeds of around £55m in FY27. The phased fleet transfer will coincide with the rollout of bus franchising.

Separately, the group also said it has won two West Yorkshire franchise contracts covering Leeds Bramley and Huddersfield. The five-year deals, which start in May 2027, are expected to generate around £40m of annual revenue.

Ryanair flew higher after the budget airline reported a 15% decline in first-half profit after tax amid rising fuel costs and announced plans for a cost-cutting drive that will include freezing pay.