Early market roundup: FTSE 100 edges down; UK data shows "fiscal bind"

Stocks in Europe were lower on Tuesday morning, having surged at the start of the week on diplomatic progress between the US and China, while data showed UK public sector borrowing has picked up.

Wealth Club analyst Susannah Streeter commented: "The Burnham fiscal bind has wound even tighter, giving him very little room for manoeuvre at the budget."

The FTSE 100 index traded down just 5.17 points at 10,733.84. The FTSE 250 fell 20.32 points, 0.1%, at 24,471.05, and the AIM all-share was down just 0.03 of a point at 795.37.

The Cboe UK 100 fell 0.1% at 1,067.65, the Cboe UK 250 was flat at 21,239.00, and the Cboe Small Companies edged up 0.2% at 18,859.24.

In European equities on Tuesday, the CAC 40 in Paris was 0.1% lower and the DAX 40 in Frankfurt was down 0.4%.

European equities were lifted by US and China optimism on Monday. China's leader Xi Jinping will visit the US this week for talks with President Donald Trump, Beijing confirmed on Monday.

In London, stocks boosted by the news were on the decline on Tuesday, returning gains. Among them, miner Anglo American was down 0.4%, while Asia-focused lender HSBC was down 0.9%.

Overnight, US stocks closed higher, with tech surging on promising artificial-intelligence related news.

Quintex Intel analyst Stephen Innes commented: "The AI trade has found its pulse again, and this time the catalyst is not another hyperscaler capex number or another model benchmark. It is Meta's Muse agent climbing to the top of Apple's free app rankings and giving the market something it had been missing through the recent valuation wobble: evidence that AI demand may finally be moving from infrastructure promise into consumer habit."

The AI buzz lifted Meta Platforms shares 11%, boosting the wider Nasdaq Composite, which surged 2.3%.

The Dow Jones Industrial Average added 0.7%, while the S&P 500 rose 1.5%.

Sterling rose to USD1.3382 early Tuesday, from USD1.3372 late Monday afternoon. Against the euro, it edged up to EUR1.1661 from EUR1.1658. Versus the dollar, the euro traded at USD1.1471, barely budging from USD1.1470. Against the yen, the buck was flat at JPY157.47 from JPY157.46.

UK public sector borrowing was loftier than expected in August, data on Tuesday showed, on an increase in spending.

The Office for National Statistics said public sector net borrowing amounted to £18.27 billion in August, up from £15.35 billion a year prior and £2.04 billion in July. Borrowing in July is typically lower than other months due to the timing of additional receipts from self-assessed income tax.

The August reading was higher than expected, as the FXStreet-cited consensus had pencilled in borrowing of £15.7 billion.

"Borrowing rose by around a fifth compared with August 2025, as spending increased more than government income from taxes and other receipts, partly reflecting the impacts of inflation," the ONS said.

The ONS noted that borrowing in the financial year up to August amounted to £77.3 billion, down 2.7% from 12 months earlier but £8.1 billion above an Office for Budget Responsibility forecast. The OBR provides forecasts for the UK economy and public finances.

XTB analyst Kathleen Brooks commented: "Borrowing to fund day-to-day activities was £12.4 billion in August, which is also above OBR forecasts, and suggests that the UK government's aim to stop borrowing to fund everyday expenses is still some way off."

The yield on the US 10-year Treasury was steady at 4.97%, where it stood at the time of the London equities close on Monday. The 30-year yield narrowed to 5.29% from 5.30%.

Brent traded at USD101.26 a barrel early Tuesday, up from USD100.28 at the time of the London equities close on Monday, but it had neared the USD110 level last week.

Financial markets remain closed in Tokyo for a public holiday.

In China, the Shanghai Composite ended up 0.1%, while the Hang Seng Index in Hong Kong was up 0.1%. Sydney's S&P/ASX 200 added 0.3%.

Gold fell to USD4,302.13 an ounce early Tuesday, from USD4,352.65 at the time of the London equities close on Monday.

In London, Kingfisher surged 8.5%. It said it saw a "solid" first half performance, and it has lifted annual profit guidance but says the "consumer environment remains mixed". The do-it-yourself retailer's brands include B&Q, Screwfix and Castorama.

Total sales in the six months to July 31 amounted to £6.86 billion, a rise of 0.8% from £6.81 billion a year prior, helping profit surge 18% to £400 million from £338 million. It maintained its interim dividend at 3.8p per share.

"We delivered a solid H1 performance, growing sales, gross margin and profits through market share gains and continued momentum across trade, e-commerce, marketplace and group sourcing. We are building a stronger, more resilient Kingfisher, with our strategic priorities creating new growth opportunities and strong financial discipline supporting performance across the business," CEO Thierry Garnier said.

"While the consumer environment remains mixed, our consistent delivery, strategic progress and opportunities ahead give us the confidence to upgrade our guidance."

Kingfisher now sees adjusted pretax profit for the full year between £595 million and £635 million, its guidance range lifted from £565 million to £625 million.

Meridian Mining shares jumped 10% as it set out a definitive feasibility study at the Cabacal gold, silver and copper project in Brazil.

In the base case, net present value, at a 5% discount rate, is USD2.09 billion.

"What a tremendous result has been achieved," CEO Gilbert Clark said.

Petro Matad plunged 21%. PetroChina has instructed the oil company to cease delivery of Block XX production.

"The Heron-1 and Gazelle-1 wells have therefore been shut in and whilst the shutdown will give some time for reservoir pressure to build up with the potential for some increased delivery on re-start, this was obviously not Petro Matad's plan," Petro Matad said.

"This latest development in the long running saga is unexpected and unwelcome. Petro Matad has made its displeasure clear to PetroChina and in consultation with the Mongolian authorities is pursuing regulatory, ministerial and diplomatic channels to bring an end to this frustrating situation."

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