The FTSE 100 was broadly flat on Monday as investors digested Labour’s losses in local elections and the latest diplomatic efforts in the Middle East.
London’s leading index was almost dead flat at the time of writing, with a strong performance for US stocks on Friday helping to maintain some sense of optimism.
US futures were slightly weaker on Monday after Trump rejected Iran’s latest peace proposals. Brent oil was 2.5% higher.
Friday’s Non-farm Payrolls showed that the US economy is in good health despite concerns about energy prices impacting the global economy, providing all the impetus traders needed to take the S&P 500 to a fresh record closing high of 7,398.
That enthusiasm wasn’t felt in London on Monday, where markets were preoccupied by the fallout from a disastrous local election for the sitting Labour government.
While the FTSE 100 was flat due to the weight of FTSE 100 company revenue shielded from UK politics, the UK bond markets showed signs of stress, with 10-year yields around 5%.
Oliver Faizallah, Head of Fixed Income Research at Charles Stanley, said: “UK bond markets remained at the centre of investor attention following early results from the UK’s local council elections, which delivered heavy losses for the ruling Labour Party and renewed questions about Prime Minister Keir Starmer’s political authority. In the weeks leading up to the results, long-end gilt yields reached multi‑decade highs as markets continued to demand a higher term premium to compensate for the persistent risk of leadership challenge.”
“Markets are concerned a new Labour government could result in looser fiscal rules and increased government borrowing.”
These concerns were felt in UK-centric stocks such as housebuilders and retailers, where Persimmon and Barratt Redrow lost around 2.5%. JD Sports slipped 3.8% and was the biggest faller, ending a storming rally following an upbeat trading statement last week.
Airtel Africa was the FTSE 100’s top riser, soaring 12% on news an investor was considering upping ther stake.
Compass Group was one of the better-performing stocks on Monday after the food service and catering group reported yet another solid set of results.
The group raised its profit outlook after revenue rose 9% in the first half, with new business levels remaining strong.
Mark Crouch, market analyst for eToro, said: “Compass Group’s latest results underline why the catering giant continues to command a premium valuation in the FTSE 100.”
“At a time when many firms are grappling with weaker consumer demand and economic uncertainty, Compass is still producing a dependable mix of growth, rising margins and strong cash generation. The figures also challenge the narrative that hybrid working and advances in AI will materially weaken demand for workplace catering.”
Compass Group shares were 3% higher at the time of writing.