Oil Spike and ECB Hike Drive Equity Losses
London equities closed lower as Brent crude breached 105 dollars and the ECB hiked rates, with inflation data intensifying market caution.
London-listed shares declined on Thursday as Brent crude oil prices surged past 105 dollars per barrel, reigniting inflation concerns across global markets. The FTSE 100 index closed down 0.6 percent at 10,608.92, while the FTSE 250 dropped 0.9 percent to 23,885.94. This decline followed a sharp rise in energy costs, which had jumped from 101.07 dollars late Wednesday, driven by escalating military tensions between the United States and Iran that threaten global supply chains.
Simultaneously, the European Central Bank executed its second rate increase of the year, lifting key interest rates by 25 basis points. The deposit facility rate now stands at 2.50 percent, the main refinancing operations rate at 2.65 percent, and the marginal lending facility rate at 2.90 percent. ECB President Christine Lagarde described the decision as a “no-brainer,” noting that the bank did not discuss future moves, while the euro fell slightly to 1.1625 dollars against the US currency.
Inflation Data Outpaces Forecasts
Hotter-than-expected US producer price data added to the inflationary pressure, with the Bureau of Labor Statistics reporting a 5.4 percent year-on-year increase in August, exceeding the forecast of 5.3 percent. This acceleration from July’s 4.8 percent prompted investors to reassess interest rate outlooks, causing global bond yields to spike. The yield on the US 10-year Treasury widened to 4.92 percent, while the 30-year Treasury yield reached 5.34 percent, reflecting a broader retreat from risk assets.
The ECB’s latest staff projections indicate that headline inflation will average 3.0 percent in 2026, with the 2027 and 2028 forecasts revised higher to 2.5 percent and 2.1 percent, respectively. Excluding energy and food, core inflation is expected to remain sticky at 2.5 percent in 2026 and 2.6 percent in 2027. Despite the inflationary pressures, the central bank upgraded its economic growth forecasts, projecting GDP growth of 0.9 percent in 2026 and 1.4 percent in 2027, citing greater resilience in the eurozone economy.
Sector Performance Diverges
Individual stock performance varied significantly within the FTSE 100. Associated British Foods suffered the largest loss, sinking 7.9 percent as weaker-than-expected sales at Primark overshadowed its new home delivery plans. The company also faced headwinds in its Grocery division due to summer heatwaves in the UK and Europe. Conversely, tobacco stocks led the gains, with Imperial Brands rising 1.8 percent and British American Tobacco climbing 1.5 percent, outperforming the broader market decline.
Mining stocks faced pressure as industrial metal prices, particularly copper, fell sharply. Antofagasta dropped 5.7 percent, Anglo American lost 4.9 percent, and Glencore shed 4.1 percent. These declines tracked the broader weakness in commodities linked to industrial demand. In New York, the Dow Jones, S&P 500, and Nasdaq Composite all fell 0.4 percent, mirroring the risk-off sentiment seen in European trading sessions reported by GN stocks/shares-surge.
