Market Overview
British equities slipped on Thursday as the European Central Bank (ECB) delivered a 25‑basis‑point increase across all three benchmark rates, raising the deposit rate to 2.50% but stopping short of committing to a future rate path. The FTSE 100 declined 0.6%, while Germany’s DAX fell 0.7% and France’s CAC dropped 0.5%. The pound weakened 0.2% to $1.3525 against the U.S. dollar.
ECB Monetary Decision
The ECB’s move was in line with expectations, lifting the main refinancing, marginal lending and deposit rates by a quarter‑point each. The deposit rate now stands at 2.50%, and the central bank refrained from pre‑committing to any further tightening.
Commodity and Inflation Data
Oil markets reacted sharply to escalating Middle‑East tensions, with Brent crude futures for November delivery jumping 5.5% to $106.82 a barrel and U.S. West Texas Intermediate for October gaining 5.7% to $101.50. The surge pushed crude above the $106 level. Gold futures for December delivery slipped 1.3% to $4,402.13 an ounce, while spot gold fell 0.9% to $4,361.16.
U.S. producer‑price index (PPI) rose 0.4% month‑on‑month in August, matching consensus forecasts and keeping the annual rate at 5.4%. Energy contributed more than three‑quarters of the monthly goods increase, highlighted by a 24.1% jump in diesel fuel prices and an 11.5% year‑on‑year rise in processed intermediate goods, indicating that upstream cost pressures extend beyond headline inflation.
Geopolitical Developments Impacting Energy Flows
Houthi forces seized the Yemeni Red Sea city of al‑Makha (Mocha), gaining effective control of the approach to the Bab al‑Mandeb Strait, a key global shipping lane. The advance threatens Saudi Arabia’s crude exports via its Red Sea terminal at Yanbu, prompting Riyadh to launch roughly 40 air strikes across multiple Yemeni districts.
Iranian state media reported projectile strikes on its southern coastline in Sirik, Minab County and Qeshm Island. Preliminary ship‑tracking data showed vessel transits through the Strait of Hormuz fell to seven on Wednesday, down from 12 the previous day and well below the 10‑day average of 14; some vessels were reported with transponders switched off, suggesting the actual traffic could be higher.
Multiple U.S. military aircraft were damaged in Iranian ballistic‑missile strikes on the Al Azraq airbase in Jordan, according to CBS News sources. ING analysts warned that the current signals point to further escalation, keeping upside pressure on oil markets and noting that any meaningful disruption to Hormuz flows could tighten the market more sharply than recent weeks have implied.
Company Updates
AB Foods Ltd indicated that like‑for‑like sales at its Primark division are expected to fall 3% in the fourth quarter ending September 12, reflecting a slowdown in the UK market. Currys plc reported a 7% year‑on‑year increase in Q1 like‑for‑like sales, driven by strong demand for cooling products during a summer heatwave and growth in its Nordic operations. THG plc disclosed that its first‑half adjusted EBITDA more than doubled to £42.8 million, but warned that new EU parcel duties would likely slow third‑quarter revenue growth to around 2%.
Currency and Index Movements
The euro‑dollar pair and other major currencies were also affected, with the euro‑dollar index (CURY) down 2.37% and the FTSE 100 (UK100) down 0.71% in the session.