London stocks retreated on Tuesday following a long weekend, with the FTSE 100 closing down 0.29% as investors confronted a combination of domestic inflation pressures and fresh Middle East tensions.
The conflict between the United States and Iran intensified over the weekend, as US forces targeted the Islamic Revolutionary Guard Corps, prompting retaliatory Iranian strikes on the United Arab Emirates and Jordan.
Iranian Foreign Minister Abbas Araghchi called on the US to honor the terms of the Islamabad memorandum of understanding signed in June to resolve the ongoing military and economic crisis.
The geopolitical developments compounded domestic concerns after a British Retail Consortium survey revealed UK shop price inflation climbed to an over two-year high of 1.5% year over year in August, up sharply from 0.9% the previous month.
The August reading significantly exceeded the consensus estimate of 0.9%, signalling a broader inflationary trend taking hold across British retail markets.
BRC Chief Executive Helen Dickinson said: “The impact of higher energy, input and commodity costs is beginning to filter through into prices, particularly for ambient foods which are typically imported and processed.”
Dickinson added: “In non-food, electrical prices rose amid the ongoing AI boom, which is forcing up the price of memory chips and storage. The months ahead look challenging for households, with rising bills putting further pressure on budgets.”
Separate data from the Nationwide Building Society showed seasonally adjusted UK house prices rose 0.2% on a monthly basis in August, beating the expected 0.1% increase and reversing a prior 0.1% decline.
Distribution and outsourcing company Bunzl (BNZL.L) fell 2.83% despite upgrading its guidance to reflect a “modest” adjusted operating profit growth at constant exchange rates, while maintaining its revenue growth expectations for the full year.
Bunzl reported higher year-over-year attributable profit and revenue for the first half, with RBC Capital Markets noting “a decent beat at the EBIT level boosted in H1 by unquantified stock profits from higher product pricing in response to Iran-related input cost inflation.”
RBC Capital Markets also highlighted that “the other key positive for sentiment is the new GBP500m buyback, approximately 6% of market cap, as the group is below its target leverage range.”
However, RBC noted that “low M&A year to date puts pressure on the remaining four months of the year to deliver against the group’s promise of a meaningful step-up in activity made at last year’s M&A-focussed seminar.”
AstraZeneca (AZN.L) bucked the broader market decline, rising 0.15% after finalising an exclusive licence agreement with Dizal Pharmaceutical Co. for Zegfrovy, an oral irreversible epidermal growth factor receptor inhibitor targeting lung cancer patients.
AstraZeneca secured worldwide rights to develop and commercialise the drug for an upfront payment of $600 million, with additional milestone payments of up to $900 million potentially payable to Dizal.