Central banks turn cautious

Global markets were dominated this week by a fresh round of central bank decisions that underscored a shift back towards caution on inflation, with policymakers signalling a longer period of tighter conditions even as growth risks mount. The Federal Reserve and Bank of England both left rates unchanged but struck a more guarded tone, while the Bank of Japan moved to tighten policy in response to renewed price pressures. Taken together, the decisions – and notably restrained press conferences that followed – point to a backdrop in which hopes of imminent rate cuts have faded, replaced by a more uncertain and potentially higher-for-longer trajectory for borrowing costs.

The FTSE 100 was -0.6% over the week by mid‑session on Friday, with the more UK‑focused FTSE 250 also trading 0.2% lower. Here are the latest articles this week:

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Middle East

US president Donald Trump and Iran’s Masoud Pezeshkian agreed an initial deal aimed at ending the conflict in the Middle East, marking a potentially significant step towards de-escalation. The proposed 14-point plan provides a formal framework for negotiations and offers grounds for cautious optimism in markets. Under the agreement, both sides will enter further talks over the next 60 days – extendable by mutual consent – with key provisions including the reopening of the Strait of Hormuz, a $300bn reconstruction programme for Iran and the eventual removal of all US sanctions. Any final settlement would hinge on the US and Iran reaching a lasting nuclear deal, while the unfreezing of assets would be contingent on progress toward that outcome.

The move towards a structured dialogue highlights a shared interest in stabilisation and has already contributed to the recent easing in oil prices. If sustained, this trend should help to moderate inflation expectations, reducing pressure on central banks to tighten monetary policy further. Historically, the establishment of a credible roadmap has often been sufficient to calm market sentiment and reinforce confidence that escalation risks can be contained.

However, it is important to balance this improved outlook with a degree of realism. Agreements of this nature are only as robust as their implementation, and the path from initial signing to a lasting resolution can be uneven. Markets are therefore likely to remain sensitive to short-term developments, particularly around adherence to the terms, the pace of negotiations and any unexpected setbacks. While the direction of travel is encouraging, it would be premature to assume a smooth or rapid resolution.

Economics

The Federal Reserve and the Bank of England both left interest rates unchanged, but the tone of their communications leaned more cautious and, in the Fed’s case, distinctly more hawkish than before. The Fed kept its benchmark rate at 3.5%–3.75%, yet materially shifted its messaging by removing any indication of future cuts and instead signalling that a rate rise is possible later in 2026, alongside higher inflation projections; chair Kevin Warsh’s press conference and statement were notably stripped-back and intentionally vague, emphasising a rethink of forward guidance and a desire to retain policy flexibility, which markets interpreted as a firmer stance against inflation.  Meanwhile, the Bank of England held rates at 3.75% in a split decision, with some policymakers favouring a hike, but struck a more balanced tone: governor Andrew Bailey stressed that although inflation pressures had eased somewhat, risks remain due to geopolitical tensions and energy markets, and the Bank stands ready to act if needed; overall, its messaging was cautious and data-dependent rather than overtly hawkish, highlighting the trade-off between persistent inflation and weak growth. 

Company news

Shares in SpaceX made a blockbuster debut on public markets one week ago, delivering one of the strongest first-week performances on record as intense investor demand drove the stock well above its IPO price, even as volatility quickly crept in. The company priced its shares at $135 and surged nearly 20% on its first day of trading, briefly topping a $2tn valuation, before extending gains in the following sessions as retail and institutional buyers piled in.  By the end of its first week, the stock remained significantly above issue price despite bouts of profit-taking and sharp intraday swings, reflecting both the strength of the initial hype and early concerns over valuation and sustainability.  Trading volumes were exceptionally high and sentiment broadly positive, underpinned by enthusiasm for its exposure to AI, satellite connectivity and space infrastructure, though analysts warned that the lofty valuation leaves little margin for disappointment as the company transitions from private to public scrutiny. 

Tesco reported a steady but unspectacular start to its financial year, with first-quarter like-for-like sales up 1.0% to £16.8bn and UK growth of 1.8% as gains in fresh food, premium ranges and online sales? were partly offset by a weaker performance at Booker. The supermarket said customer satisfaction improved strongly and highlighted continued momentum in higher-margin lines such as Tesco Finest, alongside nearly 9% growth in online sales, as it doubled down on price investment and convenience initiatives including Aldi Price Match and Clubcard offers. However, trading was softer than the prior period and slightly below expectations, reflecting a tough comparative and intensifying competition, while the group reiterated full-year profit guidance of £3.0bn–£3.3bn. 

Whitbread reported a solid start to the year, with first-quarter group sales rising 2% to £727m as strong hotel trading offset a planned decline in food and beverage revenue, reflecting its strategic shift towards becoming a pure-play accommodation business. Premier Inn UK continued to outperform the wider market, supported by particularly strong demand in London and ongoing market share gains, while the German business delivered double-digit growth, with accommodation sales rising around 13%–16% as expansion and improving brand recognition drove performance. The group said forward bookings are ahead of last year, underpinned by resilient leisure demand, and reiterated confidence in its full-year outlook, although it acknowledged external uncertainties including cost pressures and business rates. 

Accenture reported a solid but mixed third quarter, with revenue rising 6% to $18.7bn and earnings per share up 9% to $3.80, supported by margin expansion and strong cash generation, even as new bookings slipped slightly to $19.3bn and growth in consulting remained subdued.  The IT services group highlighted robust demand for large-scale “reinvention” projects and accelerating adoption of AI-driven programmes, alongside continued strength in managed services, but acknowledged headwinds from weaker discretionary spending, geopolitical disruption and delays to some client decisions. While management struck a broadly confident tone on long-term demand and strategic investments in areas such as cybersecurity and AI, it trimmed its full-year revenue growth outlook to 3-4%, reinforcing a more cautious near-term picture that unsettled investors.

AO World reported record full-year results, highlighting a strong recovery in profitability and cash generation, with revenue rising 11.4% to £1.27bn and adjusted pre-tax profit up 16% to a record £50.5m, more than doubling on a statutory basis, as the online electricals retailer benefitted from market share gains, the integration of musicMagpie and tighter cost control.  Management struck a confident but measured tone, emphasising operational discipline and resilience despite inflation and geopolitical uncertainty, with guidance for the new financial year broadly in line with expectations and confidence supported by ongoing investment in services, membership and mobile offerings. 

FirstGroup reported a robust set of full-year results, with adjusted revenue jumping 25% to £1.72bn on strong growth across both its bus and rail divisions, although operating profit edged slightly lower to £219m as higher costs and transition effects in rail offset gains in its core bus business. The group’s bus division was the standout performer, delivering solid revenue and profit growth.