London’s blue-chip index advanced on Monday, clawing back some losses after falling 1.4% during the previous week amid shifting expectations for U.S. monetary policy.
The FTSE 100 gained 0.26% as of 03:25 ET, while Germany’s DAX slipped 0.03% and France’s CAC 40 edged 0.05% lower in a mixed European session.
Sterling strengthened 0.22% against the dollar to $1.3562, adding modest support to the broader tone across UK financial markets.
U.S. retail sales fell 0.6% month-on-month in July, well below economist forecasts for a 0.1% rise and marking the steepest monthly decline since May 2025.
The disappointing figures pushed Treasury yields and the dollar lower on Friday, prompting investors to scale back expectations for further Federal Reserve tightening ahead of the new trading week.
Geopolitical tensions in the Middle East continued to weigh on sentiment, with Iran’s vice president saying on Sunday that Tehran would be successful in its “economic warfare” as Washington prepared to announce a fresh round of sanctions.
Shipping disruption through the Strait of Hormuz remained severe, with ship-tracking firm Kpler recording no commodity vessel crossings on Sunday and only five on Saturday, compared with 31 during the previous weekend.
The 60-day memorandum of understanding between the U.S. and Iran, agreed in June to halt hostilities, expired on Monday without any discussions taking place over an extension.
Jefferies analysts described the current standoff as “no war and no peace,” adding that they saw no straightforward path toward resolving the confrontation while the Strait of Hormuz remains closed.
“The only possibility remains a fudge or look the other way arrangement by which some traffic can start to flow through the Strait while the US and Iran try to negotiate a deal,” strategist Mohit Kumar wrote in a morning note.
Jefferies also noted that Europe and Asia are more exposed than the United States to prolonged disruption in the Strait due to their greater dependence on imported energy supplies.
Saudi Arabia, Turkiye and Pakistan signed the Mecca Joint Defence Agreement on August 7, with Turkish President Erdogan saying the pact had “sent an important message to the world” and describing Egyptian participation as “possible.”
On the domestic front, UK asking prices fell 2% month-on-month in August to an average of £364,999, according to Rightmove data, marking the largest decline for August since 2018.
Prices were also 1% lower year-on-year, representing the steepest annual fall since December 2023, while the number of homes available for sale reached a 12-year seasonal high.
Rightmove cut its full-year 2026 house price forecast to a range of 0% to minus 2%, compared with its previous expectation for growth of 2%.
“The mini Burnham bounce and some renewed general optimism have brought a degree of improvement,” Rightmove’s Colleen Babcock was quoted as saying, “but whether that develops into a more sustained recovery will likely depend on confidence, mortgage rates and the new chancellor’s first budget this Autumn.”
Oil prices edged lower as investors continued assessing the geopolitical outlook, with Brent crude falling 0.30% to $88.26 a barrel and WTI declining 0.70% to $80.90.
Gold moved in the opposite direction, with futures advancing 0.36% to $4,453.35 an ounce while spot gold gained 0.46% to $4,397.18.
AstraZeneca (LSE: AZN) disclosed that it had discontinued its Phase III eVOLVE-Lung02 study after an independent review concluded the combination of volrustomig and chemotherapy was unlikely to meet its progression-free survival or overall survival endpoints versus pembrolizumab plus chemotherapy.
The trial enrolled 895 patients and identified no new safety signals, with AstraZeneca confirming that other Phase III studies evaluating volrustomig will continue as planned.