FTSE 100 flat as Iran strikes defiant tone at UN

The FTSE 100 ended little changed on Wednesday as upbeat US economic growth data was offset by a gloomier outlook for peace in the Middle East.

In London, the FTSE 100 index ended down slightly at 10,705.26. The FTSE 250 fell 164.87 points, 0.7%, to 24,361.58, and the AIM all-share shed 2.40 points, 0.3%, at 793.44.

In European equities on Wednesday, the CAC 40 in Paris fell 0.4%, while the DAX 40 in Frankfurt dipped 0.7%.

In New York, the Dow Jones Industrial Average was down 0.5% at the time of the closing bell in London. The S&P 500 was 0.6% lower, and the Nasdaq Composite gave up 0.9%.

Markets in London perked up mid-afternoon after a report showed US business activity growth accelerated for a fourth successive month in September to reach the fastest rate in more than five years.

But gains were short-lived as Iran’s President Masoud Pezeshkian stood firm in a defiant address to the United Nations.

S&P Global’s “flash” US composite PMI output index improved to 58.4 in September from 56.0 in August. The reading, a 62-month high, beat the MNI-cited consensus of 55.3.

S&P Global noted that a further “surge” in service sector business activity was accompanied by a renewed improvement in manufacturing output growth.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said historical comparisons suggest that the latest survey data points to annualised growth of around 5% with a 4% gain now signalled for the third quarter as a whole.

“To put the growth surge in context, barring the spike in demand following the opening up of the economy after the Covid-19 lockdowns, the latest improvement in business activity is the greatest recorded since early 2015. Business is clearly booming now in both manufacturing and services,” he said.

In the UK, private sector growth slowed in September, as subdued domestic economic conditions and geopolitical uncertainty weighed on businesses, while cost pressures intensified.

The S&P Global flash UK purchasing managers’ composite output index fell to 51.7 points in September from 52.5 in August.

The flash services PMI business activity index also fell to 51.7 points from 52.5, below the FXStreet-cited consensus of 52.0.

Despite the pullback, analysts at RBC Capital Markets said the report points to still robust activity.

The pound was quoted at 1.3254 US dollars on Wednesday, down from 1.3342 dollars at the same time on Tuesday. Against the euro, sterling ebbed to 1.1636 euros from 1.1662 euros.

The euro fell to 1.1391 dollars from 1.1440 dollars. Against the yen, the dollar was trading at 158.39 yen, up from 157.38 yen.

Less encouraging news came from the UN summit, where Mr Pezeskhian said that Iran had been a victim of terrorism.

He said Tehran would not allow the key shipping route, the Strait of Hormuz, to be used for aggression against his country.

“We cannot let some have free access and bolster their interests from the waterway, while at the same time using that waterway to impose their aggression upon us,” he said.

Striking a defiant tone, Mr Pezeskhian said the US “must know that the resistance of the Iranian people will only increase in the face of sanctions, increased pressure, increased bullying. We will never bow our head or bend at the knee”.

The comments sent oil prices higher. Brent oil was quoted at 102.74 dollars a barrel in London on Wednesday at the time of the equity market close, up from 99.39 dollars late on Tuesday.

The yield on the US 10-year Treasury was quoted at 5.08%, stretched from 4.96%. The yield on the US 30-year Treasury was quoted at 5.38%, widened from 5.30% the day before.

On the FTSE 100, oil price strength lifted BP and Shell, up 2.8% and 2.0% respectively.

BP received a further boost as JPMorgan upgraded the oil major to “overweight” from “neutral”.

Analyst Matthew Lofting noted BP’s recent history has been “chequered” with “operational inconsistencies, strategic inconsistencies and a balance sheet poison pill”.

But now, he thinks the FTSE 100 listing is on the “road to redemption”.

Leading the fallers was JD Sports Fashion, down 5.7%, giving back most of Tuesday’s gains.

The Bury, Manchester-based sports retailer said headwinds seen in the first half of the financial year are likely to persist as it reported lower sales, profit and margin.

Looking ahead, JD Sports left financial 2027 guidance unchanged from the reduced outlook outlined in August.

The company continues to expect pretax profit before adjusting items of £700 million to £800 million and free cash flow of £460 million to £520 million.

Dan Coatsworth, head of markets at AJ Bell, said: “Investors should take solace in the fact JD has not found reason to lower its forward guidance.

“Maintaining profit and cash-flow guidance is a positive sign when a company is in a tricky position like JD, but investors only have so much patience.

“They will want to see progress sooner rather than later.”

Autotrader fell 2.8% as JPMorgan reiterated an “underweight” rating and 440p share price target.

Analyst Lara Simpson highlighted the read-through for the online classifieds “debate” on AI-led discovery and disintermediation risk from the launch of Meta Platform’s AI agent, Muse.

She thinks AI agents can “weaken click-through” and “pressure marketplace monetisation in non-exclusive supply categories”.

Ms Simpson sees a “downside skew” to earnings and valuation as distribution competition intensifies and AI-led discovery raises the risk of further multiple compression.

Elsewhere, the lower gold price put Fresnillo and Endeavour Mining on the back foot, down 3.5% and 2.6% respectively.

Gold was quoted at 4,283.94 dollars an ounce, down from 4,328.77 dollars.

On the FTSE 250, Pollen Street Group surged 13% as it said it is considering strategic options, including the possibility of the group being taken over.

Responding to a report by Reuters, the London-based asset manager noted that while it is assessing multiple strategic options, “one such possibility is for the company to be taken private”.

Reuters reported that potential buyers include mid-sized private equity firms as well as existing shareholder Wafra, which bought a minority stake in the business in 2020 through ‌its ⁠investment platform Capital Constellation. Gustavo Cardenas, a managing director of Wafra, became a Pollen Street non-executive director in 2022.

Analysts at Berenberg said: “Given the low valuation and the fact that private capital managers’ reason for being is to generate value for investors in their own funds, we are not surprised that management is being proactive in order to maximise value for its own shareholders.”

Also on the up was Ashtead Technology, which rocketed 54% after revealing a 615p per share bid approach from Ember Infrastructure Management.

The biggest risers on the FTSE 100 were BP, up 13.10p at 555.55p, Babcock International, up 22.60p at 999.50p, Relx, up 50.00p at 2,500.00p, BAE Systems, up 37.00p at 2,029.50p and Ithaca Energy, up 4.80p at 289.30p.

The biggest fallers on the FTSE 100 were JD Sports Fashion, down 4.72p at 74.01p, Fresnillo, down 128.50p at 2,864.50p, Autotrader, down 20.10p at 464.05p, Antofagasta, down 143.00p at 3,700.00p and Endeavour Mining, down 155.00p at 4,565.00p.

Thursday’s local corporate calendar has a trading statement from Halma, and half-year results from Vistry and Raspberry Pi. DFS Furniture reports full-year numbers.

Thursday’s global economic calendar has the Ifo business climate report in Germany and interest rate decisions in Norway, Sweden and Switzerland.

In the US, weekly jobless claims, new home sales and building permits data will be released.

Contributed by Alliance News