FTSE trades near all-time high

Equity markets were driven by a combination of corporate earnings, shifting expectations for interest rates and developments in the Middle East. After hitting an intraday record on 31 July, the FTSE 100 retreated for most of the week as weakness in energy companies outweighed positive corporate earnings. However, as the week ended the index was closing in on the intraday record of 10,989.5 from the previous week. On Friday afternoon, a key US jobs report is released that can have a significant impact on markets because of its influence on Federal Reserve interest-rate policy. 

In the UK, earnings season produced sharp share-price reactions, with WPP and Diageo rallying after results suggested their turnaround and cost-saving programmes were gaining traction, while AstraZeneca fell heavily after reports of merger discussions with Bristol Myers Squibb sparked concerns over strategic rationale and deal execution. 

Markets were also influenced by signs of de-escalation in the Middle East, as progress towards an agreement over shipping through the Strait of Hormuz helped push oil prices lower, easing inflation concerns and supporting broader risk sentiment, although the resulting decline in crude prices weighed on energy stocks such as BP and Shell. FTSE 100 closes in on 11,000.

The FTSE 100 was up 0.2% over the week by mid‑session on Friday, with the more UK‑focused FTSE 250 trading 2.9% ahead.

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Middle East

The most significant development in the Middle East was that Iran and Oman moved closer to an agreement on a framework for commercial shipping through the Strait of Hormuz. Iranian officials said an understanding had been reached in principle on shipping routes and that a joint statement was being finalised. However, Tehran stressed that this would not amount to a full reopening of the waterway and that broader political conditions still need to be met. The Strait of Hormuz carries around one-fifth of global oil and gas shipments. This resulted in an easing in oil prices. Lower energy prices helped moderate inflation expectations, which in turn supported government bond markets and bolstered expectations that the Federal Reserve and other central banks will have more room to cut interest rates. However, the situation remains fragile. 

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Economics

The US non-farm payrolls report on Friday afternoon is one of the most important economic releases of the month because it will provide the clearest indication yet of whether the US labour market is slowing enough to justify further Federal Reserve interest-rate cuts. Investors will be watching not only the headline jobs number, but also unemployment and wage growth, as stronger-than-expected employment could reinforce concerns that inflationary pressures remain persistent and push Treasury yields higher, while weaker data would strengthen the case for looser monetary policy. Expectations heading into the release are for payroll growth of roughly 80,000-100,000 jobs in July, following a gain of 57,000 in June, with the unemployment rate expected to hold at 4.2%. 

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Company news

SpaceX’s second-quarter 2026 results comfortably beat Wall Street expectations in the company’s first earnings report since its June initial public offering (IPO), with revenue rising 92% year-on-year to $7.8bn and its loss narrowing to $0.09 a share, versus forecasts for a $0.26 loss. Growth was driven by strong performance in Starlink and launch services. However, markets focused on the scale of spending rather than the revenue beat: capital expenditure surged to about $18.4bn during the quarter, most of it directed towards AI infrastructure, raising concerns about cash burn and future returns. As a result, SpaceX shares fell around 7%-8% in after-hours trading despite the stronger-than-expected financial performance.

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AstraZeneca shares fell sharply after reports emerged that the UK pharmaceutical group had held discussions about a potential merger with US drugmaker Bristol Myers Squibb, a deal that would have ranked among the largest healthcare transactions in history. Investors appeared sceptical about the strategic rationale and financial benefits of such a tie-up, questioning why AstraZeneca would pursue a merger with a slower-growing rival and raising concerns about potential integration risks, execution challenges and the possibility of management being distracted from AstraZeneca's successful standalone growth strategy. 

Segro agreed to a recommended takeover by US logistics property giant Prologis in a deal valuing the UK warehouse developer and landlord at up to £14.3bn, one of the largest UK property transactions of recent years. Under the terms of the agreement, Segro shareholders will receive 0.0920 new Prologis shares for each Segro share, with the option to elect for a partial cash alternative, while retaining their 2026 dividends. The deal follows several earlier approaches from Prologis that were rejected.

Flutter Entertainment completed the delisting of its shares from the London Stock Exchange, leaving the New York Stock Exchange as its sole listing venue. The owner of FanDuel, Paddy Power, Sky Bet and Betfair said the move followed a review of its listing structure and reflected relatively low trading volumes in London, as well as the additional costs and regulatory requirements of maintaining a secondary UK listing. 

BP reported a much stronger-than-expected second quarter, supported by higher refining margins, strong trading performance and robust cash generation. New chief executive Meg O'Neill outlined plans to simplify the portfolio through asset sales including the North Sea business and Archaea Energy. 

HSBC reported stronger-than-expected second-quarter results, supported by higher net interest income, strong growth in wealth management fees and solid performance in transaction banking. The bank unveiled a new $1bn share buyback programme, while maintaining its medium-term profitability targets. 

Saudi Aramco reported a stronger-than-expected second quarter, as higher oil prices offset lower production volumes during a period of significant disruption in Middle East energy markets. Aramco said it successfully maintained exports through alternative infrastructure, including its East-West Pipeline, despite supply disruptions affecting the Strait of Hormuz, and highlighted continued progress on major gas and upstream projects. 

Booking Holdings reported a stronger-than-expected second quarter, beating analyst forecasts on both measures. Gross bookings increased 9% to $51bn and room nights grew 5% to 325 million, reflecting resilient global travel demand despite geopolitical and macroeconomic uncertainty. Management also reiterated a broadly positive outlook, forecasting continued growth in bookings, revenue and earnings through the rest of 2026, albeit while warning that disruption linked to the Middle East conflict could weigh on some travel markets. 

Smith & Nephew reported second-quarter revenue of $1.6bn, up 2.8% on a reported basis, with strong growth in Sports Medicine and ENT offset by weaker performance in US orthopaedics and advanced wound bioactives. For the first half, trading profit rose 8.1% to $566m, the trading margin improved to 18.3% and adjusted earnings per share increased 11%, supported by efficiency savings that more than offset tariff headwinds. However, management cut its full-year revenue growth guidance to around 4% from around 6%, citing ongoing weakness in US knee implants, temporary headwinds in hip implants and softer-than-expected demand for wound-care product SANTYL.

Disney reported a strong fiscal third quarter that was well ahead of analysts' expectations. Growth was driven by the experiences division, where revenue increased 10% to a record $10bn thanks to higher theme park attendance and guest spending, while Disney+ and Hulu benefitted from subscriber growth, price increases and stronger advertising revenue. The success of Toy Story 5 also boosted results, helping entertainment operating income rise sharply. 

Diageo reported a mixed set of full-year results, with organic net sales falling 2% and reported sales down 3% to $19.6bn as weakness in US spirits demand and Chinese white spirits offset growth in Europe, Latin America and Africa. Despite the revenue decline, organic operating profit rose 2% and margins improved thanks to cost-cutting measures. Reported operating profit, however, dropped 27% to $3.2bn because of restructuring costs and impairment charges, including write downs related to Türkiye and the Don Papa brand. 

Persimmon reported a strong set of interim results, as the housebuilder continued to gain market share despite a challenging UK housing market. Management said it remained on track to deliver growth in line with market expectations and indicated full-year completions would be around 12,500 homes, supported by a stronger forward order book. 

Siemens reported record third-quarter results, driven by strong demand for data-centre infrastructure, electrification, industrial software and AI-related products. Net income climbed 15% to €2.6bn, while free cash flow jumped to €4.1bn, reflecting strong operational performance. The Smart Infrastructure division was a standout performer, benefitting from large data-centre projects in the US and Europe, and management raised its full-year earnings guidance, increasing its forecast for earnings per share.

WPP reported interim results broadly in line with expectations, reflecting continued weakness in client spending despite some improvement in trading trends between the first and second quarters. Management said its Elevate28 turnaround programme remains on track, highlighted strong new business wins and reiterated expectations for an improving like-for-like performance in the second half, with a return to growth anticipated in 2027.