UK stocks slid in early trading on Thursday, with the FTSE 100 down about 1% shortly after midday as investors focused on weaker commodity-linked sectors and digested the latest Bank of England and labour market updates. The index was trading lower at 10,399.63, pressured by declines across energy and mining shares amid soft commodity price signals.
Despite a reported interim peace agreement between Iran and the United States, market sentiment remained cautious. The FTSE 100’s drop accelerated as investors reassessed rate expectations following the Bank of England’s decision to hold policy rates steady.
Key takeaways
- FTSE 100 fell about 1%: The benchmark traded lower at 10,399.63 in midday trade.
- BoE held rates at 3.75%: The Bank of England kept the bank rate unchanged, in a 7–2 vote led by Governor Andrew Bailey.
- Commodities weighed on majors: Mining and energy stocks declined as commodity prices weakened.
- UK jobs data stayed supportive but not easing quickly: The unemployment rate and earnings growth were mixed against expectations, influencing rate sensitivity.
- Consumer and property stocks faced pressure: Several high-profile retailers and real estate names fell, reinforcing a cautious risk tone.
Bank of England decision sets the rate tone
The Bank of England’s Monetary Policy Committee voted 7–2 to hold the bank rate at 3.75%. According to the central bank, this is the lowest level since June 2023, after the policy rate was reduced by 25 basis points in both August and November last year.
While headline inflation eased to 2.8% in May, the BoE cautioned that inflation could rise later this year as higher energy prices feed through the economy. The committee said the path to achieving the 2% inflation target on a sustainable basis will depend on the magnitude and duration of the energy shock and how it spreads through domestic prices and demand.
In practical terms, the decision reinforced a “higher for longer, but easing continues” framework that can keep equity valuation sensitivity elevated to wage and inflation prints—particularly for rate-sensitive sectors.
Commodity weakness hits miners and energy
Market losses were concentrated in resource-heavy stocks. Fresnillo and Endeavour Mining dropped 5.5% and 4%, respectively, while Anglo American fell 3.1%. Antofagasta declined by about 2.7%, Glencore was lower by about 2.5%, and Rio Tinto slipped about 2.4%.
Energy majors also retreated, with BP down 1.6% and Shell down 1.7%. Investors appeared to be reacting to signals of weaker commodity pricing, a dynamic that typically compresses revenue expectations for miners and earnings outlooks for energy-linked businesses.
Although geopolitics can swing risk appetite, early-day declines suggested investors were not willing to offset commodity-linked downside with a “risk-on” bid.
Company moves and sector breadth
Beyond resources, stock-specific developments drove additional dispersion across the index.
- Persimmon: The housebuilder fell by more than 6.5%.
- Tesco: The retailer dropped more than 2.5% after reporting a sharp slowdown in sales growth in its fiscal first quarter.
- Property and financial services: Multiple names including LSEG, Land Securities, and British Land were reported as declining sharply, alongside other sectors such as Rentokil Initial, Bunzl, and Marks & Spencer.
Some stocks bucked the trend. Polar Capital Technology Trust rose more than 2.5%, and Informa gained 2%. Informa reported 6.4% underlying revenue growth over a five-month trading update and backed its annual outlook, a mix that supported the shares.
FirstGroup surged about 7% after the transport operator reported solid annual results and announced a new £100 million share buyback, providing both an earnings confidence signal and a potential support mechanism for per-share metrics.
UK labour market data and what it implies
In economic updates, the UK unemployment rate fell to 4.9% in the three months to April from 5% in the three months to March, the Office for National Statistics said. Economists had expected the rate to remain unchanged at 5%.
Data also showed that average earnings, including bonuses, increased 4.4% in the three months to April—matching the prior reading and coming in stronger than economists’ forecast of 4%. While the unemployment decline can be read as supportive for growth, the wage figure reinforces the inflation persistence concern highlighted by the BoE, particularly given the central bank’s focus on sustainable movement toward the 2% target.
That combination can keep rate-cut timing under scrutiny, which often weighs on broader equity sentiment even when earnings momentum exists in pockets of the market.
What to watch next
With the FTSE 100 trading under pressure, investors will likely monitor further signals on inflation pass-through, wage trends, and any guidance that shapes expectations for the pace of Bank of England cuts. Next key catalysts for market direction include upcoming UK economic releases and continued central-bank commentary, as well as company updates that can shift expectations within rate-sensitive and consumer-facing sectors.
