Lunchtime market roundup: Stocks fall on oil jump but Tesco shines

European stocks remained under pressure going into Thursday afternoon as a fresh jump in oil prices and renewed selling in sovereign bonds hit on risk appetite.

The FTSE 100 index fell 57.99 points, 0.6%, at 10,400.51 midday Thursday. The FTSE 250 shed 163.62 points, 0.7%, at 23,873.13, and the AIM all-share declined 6.53 points, 0.8%, at 769.45.

The Cboe UK 100 fell 0.4% at 1,033.28, the Cboe UK 250 declined 0.6% at 20,767.50, and the Cboe small companies traded down 0.5% at 18,685.06.

In European equities on Thursday, the CAC 40 in Paris lost 0.9% and Frankfurt's DAX 40 declined 1.2%.

In New York, the Dow Jones Industrial Average is called down 1.0%, the S&P 500 0.6% lower and the Nasdaq Composite down 0.8%.

"Geopolitics, politics and earnings risks are colliding this morning. It's another volatile start for markets. The oil price has surged by 3% and Brent crude is now trading above USD104. This is pressuring the bond market and causing stocks to sell off," XTB analyst Kathleen Brooks commented.

"All major global indices have registered a decline in the last 24 hours, the only index that is rising is volatility."

A barrel of Brent jumped to USD105.13 on Thursday afternoon from USD101.77 late Wednesday afternoon, as reports suggested an escalation in the US-Iran war may be in the offing.

The Atlantic reported the White House has asked the Pentagon to look at strike options on Iranian targets. Citing two administration officials, The Atlantic reported strikes could be made ahead of the US midterm elections on November 3.

A separate report from Axios said the Pentagon called on Central Command to finalise preparations for a resumption of combat operations in Iran.

The dollar was higher against major counterparts. The pound fell to USD1.3118 midday Thursday from USD1.3210 late Wednesday afternoon. Against the euro, sterling fell to EUR1.1798 from EUR1.1807.

The euro declined to USD1.1182 from USD1.1187. Against the yen, the buck climbed to JPY158.24 from JPY158.13.

ING analyst Chris Turner commented: "September FOMC minutes published last night reflect a hawkish Fed.

"But a hawkish Fed is firmly priced by money markets at this stage. After an expected 25bp hike to 4.25% in December, the market still looks for another 50bp of tightening next year. We think that is too aggressive, but doubt the market will want to fight against that hawkish pricing this year. This leaves the dollar well-supported and winning more friends in a slightly more difficult investment environment."

Turner continued: "Given events in Europe, we're looking for the dollar to hold onto gains over the coming months. Additionally, the US 10-year Treasury auction went very well last night, with a strong bid-to-cover ratio and a strong indirect bid, serving as a reminder that demand for Treasuries does exist if yields are high enough."

The yield on the US 10-year Treasury was quoted at 5.35%, widening from 5.32% at the time of the London equities close on Wednesday. The yield on the US 30-year Treasury was quoted at 5.73%, widening from 5.69%.

Christopher Waller, a member of the Fed's Board of Governors, said he expects the central bank to hike more if the economy moves as expected.

"When the first inflation reading for August came in hot just before the FOMC's September meeting, it was impossible to deny that inflation was still too high and not making sufficient progress toward our target," he said at the Istanbul Economic Forum hosted by the Turkish central bank.

"If the economic data continue to come in as expected, I anticipate additional hikes to support a timelier return of inflation to our 2% goal. But there is some flexibility about when those hikes will occur. The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time."

Waller said that he is not "greatly concerned that tighter monetary policy threatens a damaging slowdown".

Still to come on Thursday is a US initial jobless claims reading at 1330 BST.

Gold perked up to USD4,112.08 an ounce on Thursday, from USD4,109.52 late Wednesday afternoon.

In London, shares in banks declined amid the bond market turmoil, keeping the FTSE 100 at bay. HSBC, the largest listing in the index, was down 2.7%. Banking heavyweights Lloyds and Barclays each shed 2.4%.

Among the index's 10 largest constituents only Shell and BP, turbo-charged by a strong oil price, and British American Tobacco, supported by a positive read-across from Imperial Brands, were in the green.

Shell and BP rose 2.1% and 3.2%, while BAT added 0.6%.

Imperial Brands shot up 2.9%. It announced a new £1.5 billion buyback and reaffirmed annual guidance, despite group-level volume declines.

The firm, whose stable of brands includes Davidoff and Gauloises cigarettes, Rizla rolling paper and blu e-cigarettes, hailed the "strong momentum behind our transformation".

Imperial Brands reported it is tracking in line with guidance for the year ended in September.

Adjusted operating profit growth is expected to be within the company's 3% to 5% target range, supporting a high-single-digit boost to adjusted earnings per share.

Tesco shares rose 5.0%. The Welwyn Garden City, England-based grocer said pretax profit rose 12% to £1.46 billion in the 26 weeks ended August 29 from £1.31 billion the year prior. Adjusted operating profit increased 6.5% to £1.78 billion from £1.67 billion, beating Visible Alpha consensus of £1.72 billion.

For the financial year as a whole, Tesco now expects adjusted operating profit between £3.15 billion and £3.30 billion, the bottom end of guidance raised from £3.00 billion.

Reflecting a strong cash flow performance, Tesco increased its share buyback to £950 million from £750 million.

Unite Group was the worst FTSE 250 performer, down 5.6%. It reported an upturn in the percentage of beds sold in the current academic year but said fund valuations have declined in the latest quarter.

The student accommodation provider reiterated guidance for full-year adjusted earnings per share of 41.5p to 43.0p which would be down from 47.5p in 2025.

It said 95.6% of Unite beds were sold for the 2026/27 academic year, slightly ahead of 95.3% in the prior year, with lettings delivering 0.6% like-for-like income growth for 2026/27.

Unite said property valuations have reduced on a like-for-like basis over the quarter ending September 30, reflecting increases in property yields.

At September 30, the Unite UK Student Accommodation Fund's property portfolio was independently valued at £2.82 billion, down 4.0% on a like-for-like basis during the quarter.

In addition, the London Student Accommodation Joint Venture property portfolio was independently valued at £1.90 billion, a 3.4% reduction on a like-for-like basis during the quarter.

Elsewhere in London, Likewise shares rose 7.0%. Investment vehicle Kelso Group announced it has invested in Likewise.

Kelso bought 5.0 million shares at an average price of 30p each, £1.5 million in total. Kelso believes the floorcoverings firm has "proven management" and a strong market share opportunity after Headlam Group PLC slipped into administration.

"On 8 September 2026, Headlam, which reported revenue of £499 million in 2025, appointed administrators. In Kelso's view this was the result of its own strategic errors and a build-up of debt. Kelso believes this marks a once-in-a-generation shift in the structure of the UK market," Kelso said.

Kelso shares were up 5.3%.

Headlam shares are suspended from trading and are set for cancellation.

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