FTSE 100 Gains as Geopolitical Relief Offsets Weak UK Manufacturing Data

The UK's FTSE 100 index edged higher on Monday, with investor sentiment buoyed by signs of de-escalation between the U.S. and Iran. The gains were capped, however, by weak domestic manufacturing data and a sharp decline in heavyweight energy stocks, causing the index to lag its European peers.

Mideast Tensions Ease, Oil Prices Tumble

Broader market risk appetite was lifted by reports that Washington was shifting toward diplomacy with Tehran. The development followed a statement from U.S. President Donald Trump canceling a planned military strike, contingent on Iran's cooperation, with talks reportedly beginning Monday, according to Investing.com.

The prospect of a diplomatic resolution and uninterrupted supply through the Strait of Hormuz sent crude oil prices tumbling. Brent crude fell more than 5% to trade around $83.48 a barrel, while WTI crude dropped by as much as 6%. The positive geopolitical sentiment helped Germany’s DAX and France’s CAC 40 post gains of over 1.3%.

Domestic Headwinds Cap Gains

The FTSE's advance was limited by fresh economic data and the direct impact of falling oil prices. The S&P Global UK Manufacturing PMI for July slipped to 51.9, a four-month low and down from June’s 52.5. The reading indicates the ninth consecutive month of expansion, as the index remained above the neutral 50.0 mark.

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According to S&P Global Market Intelligence, the headline dip was driven by a reduction in stocks of purchases and slower jobs growth, which masked underlying strength in output and new orders. The significant drop in oil prices, however, weighed heavily on the FTSE's energy supermajors, which constitute a major part of the index.

Key Stock Movers

Several individual company news items also influenced trading in London:

• AstraZeneca (AZN) shares were a significant drag on the index, falling by nearly 7%. The decline followed a Financial Times report on Sunday that the drugmaker had held merger talks with Bristol Myers Squibb, though the discussions may not result in a deal.
• easyJet (EZJ) extended the deadline for investment firm Castlelake to decide on a firm takeover offer to August 7, matching the timetable provided to rival bidder Apollo.