UK stocks felt geopolitical pressure on Tuesday, with the FTSE 100 falling as the US went to the polls for midterm elections that could slow Trump’s legislative agenda.
But whatever the result is across the pond, it’s unlikely to yield a resolution to Middle East conflicts that flared up again overnight sending oil prices higher.
“Investors were sitting uncomfortably as they waited with bated breath for the US midterm elections and digested news of a resurgence in oil prices,” says Dan Coatsworth, head of markets at AJ Bell.
“European equities were in the red as Brent crude rebounded after a big drop in recent days amid hopes of new peace talks. Oil jumped 2.1% to just shy of $107 per barrel on talk that the US had resumed strikes on Iran, despite Donald Trump having ruled out launching a new wave of strikes before the midterm elections.
“Uncertainty around when energy prices will ease back has added to worries about excessive spending on AI, creating a cocktail of worries that is weighing on financial markets.”
European investors will still be laser-focused on what’s happening in US technology, particularly those with exposure to AI, after the NASDAQ gave up strong gains overnight to finish the session 1% lower.
“The mini rebound on Wall Street has fizzled out and investors remain highly wary about the high sums being poured into AI infrastructure without evidence that returns will compensate for the eye-watering expenditure,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
Although the FTSE 100 lacks major technology exposure, souring sentiment around AI and elevated oil prices dragged the index lower by 0.6%.
Most FTSE 100 stocks were negative at the time of writing.
Miners were among the heaviest hit, with Endeavour falling to the bottom of the leaderboard as gold prices retreated. Fresnillo was also weaker.
AB Foods was lower after revealing uncertainty around its sugar business due to rising input costs. Primark also failed to provide a spark, with like-for-like sales rising just 0.5%.
“Associated British Foods’ diversified business structure is proving to be of little benefit as most parts of the group are struggling,” Dan Coatsworth said.
“Still primarily known as the owner of Primark, ABF’s discount retail chain is seeing pressure on like-for-like sales and margins. Primark’s key selling point is its bargain basement prices, making it more difficult to pass rising input costs on to its customers.”
Hiscox was the FTSE 100’s best performer of the session as group insurance premiums rose 9.5%. Hiscox shares were 3% to the good.