A post-UK Bank Holiday hangover looked inevitable for the FTSE 100 given the losses chalked up across Europe, Asia and the US since the end of last week.
Government bond yields have renewed their surge as oil prices move back above $90 per barrel, bringing concerns about inflationary pressures back to the fore.
In a familiar pattern, the hints at diplomatic progress in the Middle East last week have amounted to little as hostilities between the US and Iran instead ramp up once more.
UK shop price inflation hitting a two-year high shows how these geopolitical ructions are feeding into a higher cost of living for UK households. Retailers, travel operators and companies with links to the global aviation sector were among those to fall in London, where the main gainers were in the energy sector.
US futures pointed to a subdued open on Wall Street, with a key measure of manufacturing activity in the world’s largest economy out later.
Reckitt
Reckitt was the top gainer on the FTSE 100 as the company’s Mead Johnson unit won an important court case. A federal jury in Illinois determined it had no liability in an action which alleged its Enfamil formula was linked to a severe bowel disease.
This bellwether ruling removes a significant area of doubt surrounding the business which could help clear the way to a sale which Reckitt has been pursuing for some time.
Any deal would bring to an end a damaging episode for Reckitt which bought Mead Johnson in 2017 and has been counting the costs for most of the intervening period.
Bodycote / Gamma Communications
Overseas acquirers continue to feast on the UK market like hungry customers at an all-you-can-eat buffet, with Bodycote and Gamma Communications set to be the latest names snaffled up.
Bodycote, which successfully rebuffed interest from Apollo earlier this year, has finally conceded defeat as this initial takeover saga flushed out subsequent interest from two other private equity groups in CVC and Veritas.
The story may not quite be over as CVC has said it might come back with its own improved offer but even based on the terms from Veritas the premium is a bit above the 37% average for UK takeovers so far in 2026.
After a lengthy pursuit, another private equity buyer in Epiris secured the backing of the board at Gamma for a takeover at a 53% premium to the undisturbed share price.
While some investors may be toasting the pay-off they receive from the wave of mergers and acquisitions (M&A), the longer-term implications are potentially bleak. These deals mean a further dilution of the breadth and quality of a UK market which is struggling to attract new companies to replace the ones which are being acquired.
Shein
Shein has got off to a poor start as a listed company. The drop in its share price on the first day of trading is the latest in a string of setbacks. Shein had already failed to list its shares in the US and the UK, and now Hong Kong has not proved to be a vibrant home for its stock.
The retailer joined the stock market with a valuation one quarter of its peak recorded in the post-pandemic e-commerce boom. The valuation obviously wasn’t cut-price enough, which might not surprise given how Shein attracts the type of person who always wants to pay less.
Shein’s IPO has arguably come too late to capitalise on its global retail disruption story. In recent years, the company has faced massive headwinds from changes to tariffs and taxes on small items, to heightened competition and rising costs.
Environmental, social and governance issues continue to haunt the company as consumers, politicians, regulators and investors worry about whether Shein has unethical business practices.
People have got tired of the idea of buying a dress and throwing it away after one use. Increasingly, there is an appetite to buy items that last longer and the cheapest way is to shop for pre-loved items. Vinted has become the platform of choice for cheap clothes as it is a way to snag a bargain and get good quality items at a fraction of their original price. Shein’s clothes are also cheap but the quality of items is open to question.
Shein has floated on the stock market at a time when consumers are not feeling flush. There is considerable uncertainty around the impact of higher oil prices on inflation and what that could mean for interest rates, meaning consumers are watching every penny.
One might assume that discount retailers benefit when people are scaling back their spending as individuals trade down to cheaper items. That has not proved to be the case, hence why the likes of Primark are finding life much harder. Even previous fast fashion darlings ASOS and Boohoo have been knocked sideways by changing consumer habits and industry developments.
Investors look for companies with big opportunities to grow money. With Shein, the list of negatives appear to far outweighs the positives, hence why it could struggle to attract significant investor interest in the near-term.
Shein’s shares could be volatile until the business can prove that its supply chain is squeaky clean and there is much greater transparency in everything it does.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
