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London stocks fell in early trade on Monday as sentiment took a hit after Moody’s downgraded its credit rating on the US.
At 0825 BST, the FTSE 100 was down 0.3% at 8,661.91.
Moody’s announced late on Friday that it was cutting the rating to Aa1 from the highest triple-A rating.
“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” it said.
Moody’s said “successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs”.
Kathleen Brooks, research director at XTB, said: “The downgrade is to be expected. S&P 500 ditched the US triple A grade back in 2011. Back then, S&P said that the rating downgrade was due to risks around governance and policy making stability, and downwardly revised its revenue forecasts for the US government. Exactly the same problems exist 14 years later. The House Republicans are currently debating President Trump’s fiscal bill that is designed to reduce taxes and cut government spending but would still increase the deficit.
“The difference between today and 2011 is the sheer scale of the US’s debt problem. Moody’s expects the current fiscal bill to cost $3.8 trillion over the next decade, and federal deficits to widen. They predict the deficit could balloon to 9% of GDP by 2035, up from 6.4% in 2024, driven mainly by high interest payments.”
On home shores, investors mulled the latest house price index from Rightmove, which showed that house prices edged higher in May, although the rate of growth was notably smaller than usual for the time of year.
UK house prices rose by 0.6% in May, or by 1.2% year-on-year. That compares to April’s 1.4% uplift.
The average house price now stands at a record high of £379,517, while agreed sales were up 5% year-on-year.
However, Rightmove said May’s price increase was the lowest for this time of year since 2016, as supply continued to catch up with demand.
The number of available homes for sale is now at a 10-year high, while the amount of new properties coming to market is 14% higher year-on-year.
May also suffered from a dip in demand following changes to stamp duty thresholds in April.
Rightmove’s Colleen Babcock said: “It’s another new price record this month. But having seen a May price record for the last five years, it appears to be driven more by seasonal factors given that new buyer demand has slowed.
“This month’s price increase being the lowest in May for nine years is a sign of a market that favours buyers and is more subdued than usual.”
However, Rightmove also acknowledged that the latest cut to Bank Rate could boost both buyer affordability and activity later in the year.
In equity markets, oil giant BP gushed lower after a downgrade to ‘hold’ at Jefferies.
Troubled bus and rail operator Mobico edged lower even as it reported a 9% rise in first-quarter revenues, driven by a strong performance in Spain, while the UK and Germany reported declines.
Revenue from the ALSA division in Spain surged by 13%, while revenue in the UK and Germany was down 2% and 3% respectively. North America, where the group is offloading its school bus operations, saw a 13% increase.
Precious metals miner Fresnillo shot to the top of the FTSE 100 as gold prices rose, while Hochschild also rallied.
Drinks giant Diageo gained as it reiterated guidance for full-year organic sales and operating profits after a solid pickup in underlying growth in the third quarter.
Organic net sales increased by 5.9% in the three months to 31 March, compared with a 1.0% increase in the first half, though this was mainly a result of “significant phasing benefits” which are expected to reverse in the fourth quarter.
The company also gave its first financial estimate of the impact of tariffs on its business, calculating a $150m hit on an annualised basis before any mitigation measures.
Genuit advanced as the pipe maker held annual guidance after an 8.5% rise in revenue from the first four months of the year and added that it was not directly exposed to US tariffs.
Ryanair was in focus after the budget airline reported a 16% decline in full-year profit after tax to €1.61bn as average fares declined 7%.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo | +2.30% | +23.00 | 1,023.00 |
| 2 |  |
Aib Group Plc | +1.86% | +10.00 | 548.00 |
| 3 |  |
Tesco Plc | +1.05% | +3.80 | 366.70 |
| 4 |  |
Wheaton Precious Metals Corp. | +1.02% | +60.00 | 5,960.00 |
| 5 |  |
Banco Santander S.a. | +0.86% | +5.00 | 585.00 |
| 6 |  |
Diageo Plc | +0.79% | +17.00 | 2,169.00 |
| 7 |  |
Marks And Spencer Group Plc | +0.65% | +2.30 | 357.20 |
| 8 |  |
Imperial Brands Plc | +0.48% | +13.00 | 2,717.00 |
| 9 |  |
Vodafone Group Plc | +0.48% | +0.34 | 71.52 |
| 10 |  |
Sainsbury (j) Plc | +0.43% | +1.20 | 280.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Scottish Mortgage Investment Trust Plc | -2.52% | -25.50 | 985.00 |
| 2 |  |
Pershing Square Holdings Ltd | -2.47% | -94.00 | 3,704.00 |
| 3 |  |
Carnival Plc | -2.31% | -36.50 | 1,547.00 |
| 4 |  |
Ck Infrastructure Holdings Limited | -2.25% | -12.00 | 522.00 |
| 5 |  |
Flutter Entertainment Plc | -2.11% | -395.00 | 18,335.00 |
| 6 |  |
Ashtead Group Plc | -2.06% | -90.00 | 4,281.00 |
| 7 |  |
Segro Plc | -2.00% | -13.40 | 655.00 |
| 8 |  |
Intercontinental Hotels Group Plc | -1.96% | -178.00 | 8,896.00 |
| 9 |  |
St. James’s Place Plc | -1.87% | -20.50 | 1,073.50 |
| 10 |  |
Compass Group Plc | -1.78% | -47.00 | 2,588.00 |
US close: Stocks finish week off strong as investors shrug off weak data
US stock markets finished out a strong week in solid fashion, with all three Wall Street benchmarks putting in decent gains as investors shrugged off gloomy economic data to focus on an improving trade outlook.
The Dow finished 0.8% higher, the S&P 500 gained 0.7% while the Nasdaq rose 0.5%, despite data on US consumer confidence, building permits and housing starts all missing market forecasts.
The three benchmark indices have gained 3.4%, 5.3% and 7.2% over the past five trading sessions, respectively, with sentiment boosted by last weekend’s agreement between the US and China to lower tariffs for 90 days as the two powerhouses continue trade negotiations.
Meanwhile, billion-dollar AI deals between Saudi Arabia and several American chip and server manufacturers have given markets an extra boost, as president Donald Trump continued his tour of the Middle East.
“This week, investors welcomed the easing of US-China trade tensions, which significantly reduced fears of a global recession,” said Patrick Munnelly, partner of market strategy at Tickmill Group. “This optimism was further supported by mild economic data and generally strong corporate earnings, despite some lingering caution in the market.”
Stocks held on to gains after Trump announced that the administration would be writing to the other 150 trading partners seeking deals within the next three weeks “telling people what they will be paying to do business in the United States.”
Economic data disappoints
Markets largely ignored the University of Michigan consumer sentiment index released mid-morning, which showed that confidence in the US dropped to its lowest level in nearly three years.
The closely watched gauge fell to 50.8 in May, down from 52.2 in April and well below the 53.4 pencilled in by economists. This was 26.5% lower than the same month the year before (69.1) and the lowest level for the gauge since June 2022.
In other economic data, US building permits fell 4.7% to 1.41m last month, according to the Census Bureau, hitting their lowest level in 11 months and missing the consensus forecast of 1.45m.
Housing starts, meanwhile, rose 1.6% over the month of April to 1.36m, following a 10.1% drop in March. However, that was still 1.7% below last year’s levels and under analysts’ estimates of 1.37m.
Market movers
Microsoft was flat after offering a series of new concessions to the European Commission on Friday, in a bid to settle a long-running antitrust investigation into the bundling of its Teams communications app with Office 365. Its proposal reportedly included unbundling Teams from its Office and Microsoft 365 software suites, offering those products at a lower price without Teams, and enhancing interoperability for rival services.
Shares in Charter Communications jumped on the news that the cable company will merge with competitor Cox Communications.
Meanwhile, Corona and Modelo maker Constellation Brands was higher on the news that Berkshire Hathaway doubled its stake in the beer and wine producers.
Monday newspaper round-up: Santander UK, Thames Water, Oxford Quantum Circuits
Santander UK is freezing salaries, slashing bonuses and cutting jobs across its commercial banking arm as part of a wider shake-up that could help make the bank more attractive to potential buyers. The bank began unexpectedly changing bankers’ job titles and shuffling staff into new teams earlier this month amid a larger review of the Spanish lender’s UK business, where there is mounting frustration over regulations and costs. – Guardian
The chancellor, Rachel Reeves, could be forced to spend more than £5bn and employ 92,000 extra workers across the public sector if declines in productivity continue until 2030, according to analysis of official figures. The Centre for Economics and Business Research (Cebr), an economic consultancy, said more workers would be needed by the end of the decade to achieve the same level of service, after a decline last year in the amount produced each hour by the average public sector worker. – Guardian
The former head of GCHQ has joined the board of an Oxford quantum computing start-up as Britain vies with China and the US for an edge developing the cutting-edge supercomputers. Oxford Quantum Circuits (OQC) has appointed Sir Jeremy Fleming, who led the spy agency until 2023, as a director. The start-up has raised more than £100m to build a fleet of advanced quantum computers, some of which are already being tested by customers. – Telegraph
Creditors of Thames Water are braced to write off £6 billion, or one third, of its debt if KKR successfully takes control of the company. Additionally, according to informed sources, creditors will only be able to swap their debt for new equity in the troubled regional water monopoly if they are prepared to inject more cash. – The Times
The government is being urged to consider leaning on Britain’s £150 billion foreign exchange reserves to prevent deep cuts in overseas aid to low-income countries threatened by the withdrawal of US funding. A group of Labour MPs wants the government to maintain its commitment of nearly £2 billion to the World Bank’s International Development Association, a facility for poor countries, which is in the line of fire as the UK cuts its foreign aid budget. – The Times
