European markets moved higher in early trading on Wednesday, despite conflicting messages about the Middle East crisis.
The FTSE 100 moved back through the 10,000 level, led by banks and miners. Oil prices remained volatile as talk of a potential peace plan was offset by ongoing strikes in the Middle East and reports of the US sending more troops to the region.
The 10-year gilt yield fell 0.15 percentage points to 4.8%, bringing some calm to the bond markets.
There were tentative signs of increased risk appetite on equity markets as investors took advantage of depressed valuations in pockets of the airline and housebuilding sectors, with International Consolidated Airlines and Barratt Redrow among the top FTSE 100 risers.
UK inflation
Is this the calm before the storm as far as inflation goes? UK inflation remained steady at 3% in February, bang in line with expectations. However, this reading does not reflect the Middle East crisis which didn’t unfold until the start of March.
The February reading is meaningless given how the inflation backdrop has completely changed over the past four weeks.
The spike in oil and gas prices has a direct impact on consumers and businesses, and it won’t show up for another month in UK inflation readings.
Interest rate expectations have radically changed in recent weeks as the market braces itself for an inflationary shock.
The Bank of England will be watching the data closely to determine future interest rate policy, but it won’t be able to draw any conclusions from the February data as it relates to a different world than what we’re seeing today.
Crest Nicholson
Crest Nicholson is unlikely to get much outside help given the current backdrop for the housebuilding sector so investors will have been encouraged to see the benefits of self-help reflected in its latest update.
The company has seen sales rebound from the depressed levels seen at the back end of 2025 when a late Budget dampened demand. Crest Nicholson has not seen any impact from the Iran conflict and guidance for the financial year is unchanged.
The market has acted with relief to this news and the progress seen internally after a tough period for the share price. Inevitably, Crest Nicholson is not being complacent about the risks.
The strategy designed to rebuild the firm’s fortunes is now a year in and there are signs of tangible headway. A key strand of the strategic shift is Crest Nicholson focusing on the niche between mass market and high-end properties.
Historically, the company has run into issues around build quality and work is going on to repair its reputation and get customers back on side.
The plumbing behind the business is also being upgraded as Crest Nicholson simplifies its divisional structure and improves background processes.
After these signs of progress, the hope will be that Crest Nicholson’s turnaround is not knocked off course by recent events and the potential impact on build costs and customer demand.
United Utilities
Water utilities firms should in theory be somewhere investors look to hunker down when markets get choppy. However, the sector’s recent woes around pollution and financial issues have tarnished its reputation and undermined its defensive qualities.
In this context, United Utilities’ latest update is cleansing as it notes an accounting change around debt which will give earnings a boost and, more importantly, reveals how the business is protecting itself against the current energy shock.
The company’s hedging policy and some regulatory protection look set to leave it insulated against energy price increases for a good period. That should allow United Utilities to continue to deliver the consistent stream of revenue the market looks for from the utilities space.
ASOS
Dan Coatsworth, head of Markets at AJ Bell, comments:
ASOS continues to travel the road to recovery, but its journey is far from complete. It is taking baby steps to get back on top and regain its position in the upper echelons of fast fashion.
A big increase in gross margins is encouraging, as is a reduction in the number of orders being returned. Holding ASOS back is ongoing weakness with topline sales. It suggests it needs to dig deeper into its bag of magic tricks to drive momentum in the business.
Despite the shares bumping higher on the trading update, the longer-term trend paints a difficult picture. Fundamentally, the market has yet to be convinced by ASOS’ comeback attempts, with the share price yesterday having hit its lowest level since October 2008.
Never one to pass up an opportunity to pick at the bones of struggling rivals, it is notable that Mike Ashley’s Frasers Group last week increased its interest in ASOS to 29.2%.
Frasers’ style is to use a position as a large investor to call for change or strike business deals, rather than act as a precursor to a full takeover. It’s more likely to buy a company outright or cherry pick assets through a pre-pack administration deal, and that is not something applicable to ASOS in its current form as it is keeping the lights on.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
