Early market roundup: Stocks shake off conflict and tariff concerns

London indices opened mostly in the green on Friday, as Brent oil returned below the USD100 mark and despite continued escalation in the Middle East, a fresh wave of US tariffs and concerns over AI expenditure, which hit US tech stocks.

The FTSE 100 index opened 34.35 points higher, 0.3%, at 10,673.52 on Friday, taking its weekly advance to 0.7%. The FTSE 250 added 81.65 points, 0.4%, at 23,708.98, and the AIM all-share edged up just 0.09 of a point at 768.85.

The Cboe UK 100 was up 0.4% at 1,061.04, the Cboe UK 250 added 0.3% at 20,625.28, and the Cboe small companies was flat at 18,471.01.

In Frankfurt, the DAX 40 was up 0.5%. The CAC 40 was 0.2% higher. So far this week, the CAC is down 0.3%, but the DAX is up 0.2%.

The US said Thursday that it would impose new tariffs on 60 trading partners over forced labour concerns, replacing an expiring global duty rolled out by President Donald Trump earlier this year.

The levies, which take effect Friday, range from 10% to 12.5%.

Under Thursday's announcement, economies that have implemented a forced labour prohibition are hit with the lower 10% rate. They include Canada, the EU and the UK.

Others were deemed to deserve harsher levies, receiving the higher 12.5% tariff, a US official told reporters. Trading partners like China and Japan are covered in this group.

A UK government spokesperson said: "There is no change to the tariff rate facing UK businesses as a result of this announcement.

"The UK remains on a 10% tariff rate and the preferential access secured under our agreement with the US remains in place.

"We take forced labour very seriously and ensure that in global supply chains UK businesses are not complicit in forced labour and human rights violations.

"The US has recognised the steps the UK is taking, which is why there are no additional tariffs for the UK under this announcement."

Meanwhile, European Commission spokesman Olof Gill said: "The EU notes positively the fact that this outcome is in line with the US tariff commitments agreed under the EU-US joint statement."

Sterling advanced to USD1.3339 early Friday, from USD1.3303 at the time of the London equities close on Thursday. Against the euro, it traded at EUR1.1699, edging higher from EUR1.1696.

The euro rose to USD1.1397 from USD1.1370. Against the yen, the buck bought JPY163.71, down from JPY163.88.

Commerzbank analyst Michael Pfister commented: "The impact on the FX markets is likely to be limited for the time being as: a) the new tariffs replace the expiring general tariffs of 10%, so the effective tariff rate is unlikely to rise significantly; and b) the White House has published a 55-page list of exemptions.

"The actual effects are therefore likely to remain limited for the time being. But it is clear that the US administration is sticking to its tariff policy, so we could see further surprises in the coming weeks."

In Tokyo on Friday, the Nikkei 225 ended down 2.7%. The Shanghai Composite fell 1.6%, while the Hang Seng Index in Hong Kong was down 1.1% in late trade. The S&P/ASX 200 ended 0.8% lower.

In New York on Thursday, the Dow Jones Industrial Average fell 1.0%, the S&P 500 declined 1.2%, and the Nasdaq Composite slumped 2.1%.

Intel rose 4.4% in after-hours dealings. Intel said it plans to raise capital expenditure significantly as it looks to boost supply capacity to meet "unprecedented" AI demand.

Chief Financial Officer David Zinsner told analysts on the earnings call following second-quarter results that Intel plans capex of USD20 billion in 2026, up from USD18 billion previously, with 2027 projected to be "significantly" above 2026.

Zinsner said the increased investment is a signal of confidence in all business segments but stressed Intel remains very disciplined around spending.

The Santa Clara, California-based chip maker said revenue rose 25% to USD16.13 billion in the three months to June 27 from USD12.86 billion a year ago, topping VA consensus of USD14.36 billion.

Intel said its attributable net loss widened to USD10.85 billion in the quarter from USD3.02 billion the year prior. Basic and diluted GAAP loss per share was USD2.16 compared to USD0.67 a year ago.

SPI Asset Management analyst Stephen Innes commented: "Technology stocks spent Thursday being dragged across the rocks by the same force that has powered the sector for the past two years: artificial intelligence spending.

"Alphabet's latest earnings did little to challenge the strength of AI demand, but its decision to lift capital expenditure guidance reinforced the more uncomfortable question of how much money the hyperscalers must keep pouring into the ground before investors begin demanding a clearer return.

"Then Intel arrived after the closing bell with the kind of earnings report the market desperately needed, offering evidence that the AI investment wave is still creating real demand beyond the handful of companies writing the largest cheques."

The yield on the US 10-year Treasury eased to 4.69% from 4.71% at the time of the London equities close on Thursday, while the 30-year yield eased to 5.17% from 5.18%.

A barrel of Brent eased to USD98.63 on Friday morning from USD100.98 late Thursday. Gold rose to USD4,052.38 an ounce from USD4,047.56.

Tehran said Friday that US President Donald Trump's threat to pay for shipping damage with Iranian assets was an "incendiary precedent".

Trump had said that Washington would start using frozen Iranian assets "that the US has in its possession, and controls" to pay for "any and all damages done to Ships, Cargo or anything related" in the region.

Swissquote analyst Ipek Ozkardeskaya commented: "Rising oil prices are once again fuelling inflation expectations. The European Central Bank left interest rates unchanged yesterday but kept the door open to a September hike if higher energy prices prove persistent enough to feed through to broader inflation.

"Elsewhere, the Fed is expected to leave rates unchanged next week, but expectations for a more hawkish stance continue to build."

The Federal Reserve decision is on Wednesday, ahead of a Bank of England rate call on Thursday. Thursday's decision at Threadneedle Street follows numbers earlier this week which showed the consumer price index rose by 2.6% in the 12 months to June, easing from 2.8% in May and below the FXStreet-cited forecast of 2.7%.

UK retail sales were stronger than expected last month, numbers from the Office for National Statistics showed Friday, with annual growth spiking to the loftiest level since January.

UK retail sales volumes surged 4.2% year-on-year in June, picking up speed from 3.5% in May. The June figure topped the FXStreet-cited consensus, which had pencilled in a slowdown in annual retail sales growth to 2.3%, and was the chunkiest annual surge since a 4.6% rise in January.

Wealth Club analyst Jonathan Moyes commented: "Forecasters were predicting a dreary month for retailers as shoppers were expected to take shelter from the heat. Instead, the heat appears to have led to a sales bonanza as shoppers stocked up on air conditioning units, outdoor furniture and sports merchandise as the World Cup got underway.

"Whilst it is pleasing to see our beleaguered retailers get a lift over the month. The reading will do little to improve consumer and business sentiment. The resumption of the Iran war in July has seen Brent Crude touch USD100 again overnight. This will undoubtedly weigh on consumers in the latter half of this year as inflation again begins to take its toll. Mortgage rates are already responding to a likely rise in interest rates in response."

In London, designer and manufacturer of electronic components discoverIE Group shot up 11%.

It said "strong momentum" it saw last in its prior financial year has continued into this one.

Sales in the first quarter ended June were up 6% on-year organically, with orders surging 31% organically. Including the recent buys of Trival and Storm, constant currency sales are 10% higher.

"Both [Trival and Storm] are performing well and the regulatory approval process for the acquisition of 3Gmetalworx is progressing. The positive outlook continues with full year adjusted earnings tracking ahead of the board's expectations. The group has a strong order book, pipeline of design wins and acquisition opportunities, and is well placed for continued growth," discoverIE added.

Renishaw rose 8.5% as it hailed "record" fourth quarter revenue, and said it expects annual profit "ahead of expectations".

The supplier of manufacturing technologies, analytical instruments, and medical devices said it saw "accelerating growth" as the year ended June 30 progressed. It culminated in record fourth-quarter revenue of £243 million, a rise of 27% on-year and 18% on-quarter. "

Demand remained strong from customers in the semiconductor and electronics manufacturing equipment sector, and from the aerospace and defence sector," Renishaw said.

For the full-year, it expects revenue growth of 14% to £815 million and adjusted pretax profit of £167 million, up 31%. Annual profit is "ahead of expectations", it added.

Elsewhere in London, Victoria fell 6.0%. The flooring firm reported a wider annual loss but said the "factors behind subdued demand are considered cyclical rather than structural".

"We believe Victoria is well placed to benefit as conditions improve. Victoria is adapting and each 5% increase in volume is expected to contribute approximately £20 million to Victoria's operating profit," Executive Chair Geoff Wilding said.

Victoria's pretax loss in the year to March 28 widened to £62.0 million from £11.5 million. Revenue fell 6.2% to £1.05 billion from £1.12 billion.

Still to come on Friday are flash purchasing managers' index figures from the UK at 0930 BST and the US at 1445.

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