Daily market update: Markets mixed as Iran crisis continues, United Utilities, Rolls-Royce

The relative calm the market has displayed so far over the Iran war has started to dissipate, with oil prices creeping higher on fears a timely resolution to the conflict is slipping away.

The FTSE 100 was helped by its oil and gas heavyweights but elsewhere there was heavy selling in Europe as the energy price shock threatens to intensify and with it dials up inflationary pressures across the board in the global economy.

A strong performance in emerging markets helped Unilever to beat expectations, but the robust performance merely helped the shares stand still as investors weigh what is likely to be a pretty difficult consumer backdrop.

Mining services business Weir slumped as long-serving CEO Jon Stanton announced plans to stand down. Stanton has helped to significantly reshape the business and the investor reaction implies some trepidation about Weir’s prospects under new leadership despite resilient trading.

The final meeting for Jerome Powell as Federal Reserve chair was an eventful one despite the lack of change on headline interest rates. While President Trump appointee Stephen Miran voted, as he has consistently done, for a rate cut – three other members objected to language suggesting future cuts.

Powell insisted he would stay on as a governor until 2028 after surrendering his current role and again decried interference from the Trump administration to put the spotlight on this area of market concern once again.

United Utilities

Plans for a massive flood of investment at water utility company United Utilities has created an unusual level of excitement for a part of the stock market historically seen as pretty boring.

In more recent times the water sector’s name has been mud with investors, regulators, the public and politicians thanks to issues around pollution and financial mismanagement across the broader sector.

The plan to support areas like data centres, clean energy and new homes is being taken as a game changer by investors for now, although delivering on this big programme of spending and remaining on time and on budget is the big challenge for the company.

Whitbread

Pressure from US activist investor Corvex has taken hold at Whitbread as the company announces plans to sell and lease back a big chunk of its hotel estate and make significant changes to its restaurant business. The market seems unconvinced by the strategy based on the initial investor reaction.

Lots of Whitbread’s peers operate an ‘asset-light’ model whereby they don’t own the sites they manage. There are advantages and disadvantages to both and while Whitbread will remain an owner of some of its hotels, the changes announced today and the plans to focus on leaseholds in the future are a clear nod in this direction.

We can’t be too far away from Whitbread renaming itself Premier Inn PLC given its remaining branded restaurants are to be replaced with hotel-based food offerings. The logic to this move is obvious although the potential 3,800 job losses will only add to the gathering gloom around the UK economy.

This in itself is a headwind for Premier Inn to manage. It will hope its keenly priced rooms, which are sold on the consistency of what you’re getting for your money, will see it benefit from people trading down from more expensive options.

Rolls-Royce

The unbroken ascent in Rolls-Royce shares since the appointment of CEO Tufan Erginbilgic has been interrupted by some turbulence in recent months, but today’s trading update helped restore some calm.

The clarity of the company’s reassurance that it can fully mitigate the financial impact of Middle East disruption has resonated with investors and helped the company to claw back a bit of ground. Sticking to full-year guidance helped too.

Rolls typically works on projects with extended timeframes which won’t be affected overnight by geopolitical disruption. Higher fuel costs may even prompt some operators in the aviation sector to upgrade their fleets early to improve efficiency.

However, the longer the crisis goes on the greater the risk of disruption to the airline sector which then has a knock-on effect in terms of delays and cancellations to existing work.

Helpfully the company has strengthened its balance sheet which provides a useful buffer for any stormy weather Rolls might encounter in the market backdrop.