FTSE 100 ekes gains despite bond market drag, M&S turns green despite £300m cyber hit

• FTSE 100 closes 5 points higher
• M&S posts strong results for last year but £300m cyber hit
• JD Sports reports stumbling start to new year  

4.58pm: FTSE 100 closes slightly higher despite inflation concerns

The FTSE 100 index closed up 0.1% at 8,786 on Wednesday, rebounding modestly after early losses triggered by mixed earnings reports and hotter-than-expected UK inflation data.

According to Patrick Munnelly, Partner in Market Strategy at Tickmill Group, the surprise inflation rise in April—especially in metrics closely watched by the Bank of England—has led investors to dial back expectations for near-term interest rate cuts. The probability of an August rate cut has fallen to 40% from 60% prior to the inflation report.

In reaction, the British pound surged to a three-year high against the US dollar, while the more domestically sensitive FTSE 250 midcap index declined. Separately, official figures showed UK house prices posted their fastest annual increase since late 2022 in the year to March.

4.09pm: FTSE heading for positive finish and M&S shares turn green

London's blue-chip index is heading towards a small gain, extending its current winning to a potential fifth day.

The Footsie's leadboard is being topped by precious metals Fresnillo PLC (LSE:FRES), rising 4.1% as gold and silver prices benefit from a return of safe haven demand. Endeavour Mining PLC (LSE:EDV) is up 3.1% too. 

Next is Babcock, with the defence contractor lifted by a positive reaction from analysts to a briefing it gave on its Cavendish nuclear arm.

Phoenix Group has also been boosted by broker chat, upgraded by Deutsche Bank on the back of its growing balance sheet flexibility, improved cash generation and a clear shift in strategic direction.

Helping the resurgence of the index, Marks and Spencer Group PLC (LSE:MKS) has flipped to a 3.3% gain from the similar negative figure in earlier trading. 

Water companies Severn Trent and UU, defence and aero names Rolls-Royce and BAE Systems are other risers.  

JD Sports Fashion PLC (LSE:JD.) remains the biggest faller, down almost 10% as although its full-year results hit targets, an update on first quarter trading disappointed the City. 

Among the index's heavyweights, oil giants Shell and BP are both weighing, down 0.3% and 1% respectively, along with smaller falls for HSBC, Rio Tinto and LSEG. 

3.32pm: EU and US talks faltering

The European Union has shared a revised trade proposal with the US to try and gee up momentum in talks with Washington.

Amid lingering doubts about a transatlantic deal, Bloomberg reports, sources familiar with the matter are suggesting the new proposals include gradually reducing tariffs to zero on both sides for non-sensitive agricultural and industrial goods.

The paper also reportedly mentions international labour rights, environmental standards and economic security, as well as outlining mutual investments and strategic procurement in energy, artificial intelligence, and digital connectivity.

2.58pm: US stocks open lower, FTSE and DAX in green 

The FTSE 100 and the DAX are marginally positive in Europe, while US stocks have joined others in Europe by selling off. 

Leading the decline on Wall Street is the Dow Jones, down 0.7% as UnitedHealth, Amazon and Nike all fall.

The broader S&P 500 is down 0.4%, the tech-heavy Nasdaq has dipped 0.3% and the small cap Russell 2000 has slid 1%. 

Notable fallers include retailer Target, after it downgraded its outlook. 

Back in London, Babcock is now the top riser, up 3.75% to an eight-year as analysts hum happy tunes about the defence contractor's Cavendish nuclear arm. 

2.25pm: Bond market risks, but stock market buying power

Markets have been mixed so far this week, with stocks generally in the red on Wednesday, as rising global bond yields drag.

However, losses for the major equity indices are small so far, despite US, Japanese and now UK and European long end bond yields jumping.

The risk for stock investors, says Kathleen Brooks at XTB, is a temporary "yield tantrum" from the markets.

While bonds have pressured stocks, there has not been a major impact on equity markets this year, says Brooks, even though yields have risen sharply in the last three months, with the 10-year US Treasury yield up 11bps and the UK yield nearly 20bps, with gains even larger for 30-year yields.

"As yields have been rising, the main US blue chip indices have risen by 20% plus in the past month, the DAX made a fresh record high, and the UK’s FTSE 100 is a mere 120 points away from its record high," Brooks points out.

Thus, she warns, "rising bond yields could be a risk factor" for markets as we move into the summer and the second half of the year.

"The key drivers for US equity markets in the past month have been growth stocks and momentum, with falling volatility helping to sustain this rally.

"While these factors have helped US markets recover after a staggering sell off in the first half of April, they could also weigh on markets if there is a sudden crisis.

"A bond market crisis is exactly the sort of event that could send stocks tumbling and volatility surging. It’s also harder to recover from compared to the man -made tariff crisis."

While there is endless speculation about "existential crises that never seem to materialize in the way you imagine them to", Brooks says it is more useful to concentrate on the fundamentals, such as earnings data. 

Earnings expectations for S&P 500 companies have been revised sharply lower for Q2 (top chart, below), with those for the Eurostoxx 600 also been revised lower (bottom chart), but not to the same extent as US stocks.

"Earnings reports have a habit of exceeding analyst estimates, and weaker macro-economic data may be keeping analysts cautious for now, which could limit enthusiasm for stocks to push into fresh record territory.

"It is worth noting, that even though analysts were bearish about US blue chip earnings growth in Q1, sales and earnings have both beaten analyst estimates," says Brooks. 

Sales and earnings growth are lower than in the last quarter of 2024, but analysts remain optimistic for the outlook for the rest of this year and expect growth to pick up.

"The rally in US stocks is remarkable because it has defied lower earnings and sales growth compared to recent quarters, there is a risk of analyst earnings downgrades and companies themselves are citing recession and uncertainty as key risks to their future outlooks on their earnings calls.

"This suggests that buying power is strong in the market, most likely driven by retail traders who were an important stabilizing mechanism during the sell off in stocks in April. If retail traders stick with stocks, especially US stocks, then equities could continue to recover."

1.20pm: M&S blames 'human error'

M&S chief executive Stuart Machin told analysts and reporters that "human error" was at fault for hackers gaining access to its IT systems through a third party.

Machin said he could not comment on whether a ransom had been paid in the cyber attack, for which the retailer today estimated would cost it about £300 million.

"We didn’t leave the door open, this wasn’t anything to do with under-investment," he insisted. 

12.31pm: Shares lower around the world

London's blue chips remain mostly lower, in line with those on the Continent, and US futures are pointing the same way. 

Traders and market analysts continue to point to higher geopolitical concerns around the Middle East.

Bond yields are higher on both sides of the Atlantic too, which generally weighs on stock markets. 

Markets are "braced for volatility", says market analyst Kenny Polcari at Slatestone, with bonds coming under pressure "as investors focus on the ongoing deficit spending" in the US. 

The US and UK 2-year, 10yr and 30-yr yields are all up a handful of basis points today.

"All this tell us is that investors are demanding higher yields on the money they lend to the gov’t and at some point those higher yields will present a problem for stocks," he says.

Reports citing US officials that Israel is making preparations to potentially strike Iranian nuclear facilities is "causing both gold and oil to surge", Polcari says.

Oil prices are down 0.6% now but gold is up 0.6% at $3309. 

11.38am: JD Sports silver linings?

JD Sports shares are down 8% now, with analysts saying this is due to first-quarter trading being worse than expected - though some silver linings were highlighted.

"While the reaffirmation of FY26 guidance provides some reassurance, it may not fully satisfy investors given the weakness in the US market," said UBS analyst Robert Krankowski.

Additionally, looking beyond the new year, Krankowski said the recent announcement of the acquisition of Foot Locker by Dick's Sporting Goods "introduces potential for increase competitive pressures over the medium-term".

Panmure Liberum's Anubhav Malhotra said the Foot Locker deal at 18 times earnings "highlights the relative undervaluation of JD Sports, which generates six times the PBT but has a market cap only 2.6x higher than Foot Locker’s purchase price".

11.02am: Bloomberg outage hits traders and UK gilt auction

An outage of Bloomberg terminals, which are used by traders and across the financial services industry and some lucky financial media desks, is over, after leading to the delay of a UK government bond auction.

The UK Debt Management Office had been carrying out an action of 4% gilts maturing in 2031 this morning, but said it was extending the bidding window due to Bloomberg system issues.

Traders said live pricing and other market data was not functioning and screens were blank, Reuters reported, with only the chat function still operational.

The European Union was also reported to have delayed an auction.

10.13am: Inflation concerns

The UK inflation figures earlier this morning probably rule out the Bank of England cutting rates at its next meeting, economists say. 

April CPI accelerated to 3.5% YoY, up from 2.6% in March and above Bloomberg consensus expectations of 3.3%.

This reflected a "triple whammy" of a higher Ofgem energy price cap, says Kallum Pickering, chief economist at Peel Hunt, including energy and water, an increase in employer National Insurance, as well as a rise in the minimum wage. 

He notes that the jump was less of a surprise to the BoE, which had projected a rate of 3.4%. 

The April spike in price growth marks the first time that annual inflation has risen above 3% since March last year, which was the tail-end of the inflation surge that followed the Russian invasion of Ukraine in February 2022, and the largest monthly jump since October 2022.

Pickering says the April surprise does not change his view that the BoE will cut rates two more times this year (in August and November) but the data does "probably eliminate any chance that the BoE could cut again as early as the next meeting on 19 June".

He adds: "If the recent trend of upside surprises to UK economic activity—especially in domestic-oriented sectors such as retail—continues, and the outsized April jump in prices leads to a slower disinflationary process as stronger demand amplifies even small second-round inflationary effects, it could shift the calculus at the BoE and encourage policymakers to hold through the third quarter as a precautionary measure, before re-starting the cutting cycle once inflation data are closer to the 2% target again after these one-off effects have fully washed out."

Jeremy Batstone-Carr at Raymond James says UK inflation was expected to start the new financial year with a big upward spike due to the expected factors like the rise in energy price cap and water bills, but the 3.5% rate indicated "that businesses have passed higher costs on to consumers by more than thought likely". 

The "bigger concern" for the BoE is the increase in underlying prices, he says, with rate-setters likely to focus on the jump in services prices, driven in part by airfares, which Ryanair recently flagged in its results, mobile phone bills, restaurant prices, transportation fees and utilities costs that are "likely to prove stickier". 

“The Bank will hope that the softening labour market might prove sufficient to keep wage increases and higher inflation expectations under control, but this cannot be guaranteed," he adds.

"From a policy perspective, Bank Chief Economist Huw Pill has indicated concern regarding rising price pressures. His hawkish tilt likely reflects the probability that a divided Monetary Policy Committee will remain extremely cautious regarding rate cuts in the immediate future."

9.39am: M&S momentum halted

Some views on the M&S results.

Deutsche Bank's Adam Cochrane says full-year results saw a 5% PBT beat, "driven by better clothing sales and margin but the momentum has been halted by the cyber attack".

The estimated £300 million cost is "greater than we anticipated but we believe this reflects management is confident that a solution is in sight".

"The quantification should also help investors draw a line under the impact and start to rebuild confidence from here."

At Peel Hunt, Jonathan Pritchard says the cyberattack "will have major implications for the short and the long term", with the £300 million hit to EBIT before mitigation or insurance. 

"The key thing here, however, is how the attack will impact M&S in the long term. We do not class this as a 'PE of 1' event, and place our recommendation under review despite the fact that prior to the attack, M&S was in great form."

Dan Coatsworth, investment analyst at AJ Bell, says M&S has "lost a significant number of sales" after halting online orders, while disruption to supplies meant gaps on the shelves and more lost sales in-store. 

"The fact online operations might not be back to full power until later in the summer means the company still cannot achieve full earnings potential for some time to come.

"There’s still a big unknown regarding any potential fines on Marks & Spencer from the Information Commissioner’s Office (ICO), which enforces data protection regulation.

"There are plenty of examples of companies that have been fined by the ICO for not taking appropriate steps to prevent data breaches. The maximum fine by the ICO is £17.5 million or 4% of global annual turnover, whichever is higher. Marks & Spencer has just reported £13.8 billion revenue, so 4% of that figure is £552 million."

9.07am: FTSE edges into green

The FTSE 100 was wading slightly the red for the first hour but has just stepped up into a green and pleasant land, helped by gains for precious metals miners.

Gold and oil prices are on the up as Middle East tensions rise. Fresnillo is the top riser, with Endeavour Mining close behind.

"An escalation of conflict in the Middle East is back at on the worry lists following reports that Israel could be planning to hit Iranian nuclear sites," says Susannah Streeter, market analyst at HL.

"The situation in Ukraine is also a fresh cause for concern, as although Trump as said negotiations for a truce will start soon, the US administration appears to be retreating from a role as broker in attempting to end the conflict."

Gold has pushed up to $3,010 an ounce as investors shift cash into safer havens.

"The lower dollar is also making the price of the precious metal look more attractive to buyers around the world," Streeter adds, with the greenback sinking to a two-week low.

The pound is up 0.2% at $1.341 but down 0.2% versus the euro. The single currency is up 0.45% versus the dollar at $1.1332.

"Stagflation is rearing its head again as a big worry, as slowing growth and rising inflation are eyed," says Streeter.

Brent crude is up 1.3% to $66.2 a barrel amid reports swirling about Israel’s preparations for strikes against Tehran, while US-led talks aimed at persuading Iran to halt uranium enrichment have faltered.

"If Israel does strike, it’s feared that Iran could close the Strait of Hormuz, which is a key route for crude from producers in the Gulf, disrupting world supplies."

8.48am: Shoe Zone unlaced again

Not a good day for retail investors, with Shoe Zone PLC (AIM:SHOE) shares down 16% as it swung to a first-half loss and said the "trading environment continues to be difficult as consumer confidence continues to be low".

Having already warned on profits in December, when it halved its full year profit before tax forecast to £5 million, it said the challenging trading conditions experienced in the first quarter have seen a little improvement.

"During the second quarter, we have seen more stability/reduction in the price of containers, and a strengthening of sterling against the dollar, both of which will start to benefit in the second half of this financial year," 

8.30am: Currys shares wobble at three-year high

Another retailer in the red, but only slightly, is Currys PLC (LSE:CURY), down 0.5% as it said it would resume dividends after profits swelled 37% in the past year.

Adjusted profit before tax are seen coming in at around £162 million for the year to 3 May, with expectations already high after two profit guidance upgrades in recent months. 

Group like-for-like sales grew 2% over the year after a 4% advance in the final 17 weeks.

8.14am: FTSE 100 opens in the red, retailers leading the decline

The FTSE 100 has opened in the red, but only slightly, with retailers JD Sports Fashion PLC (LSE:JD.) and Marks and Spencer Group PLC (LSE:MKS) leading the fallers on the back of their results. 

In opening trades, the London benchmark has dropped 12.5 points to 8,768.6.

JD shares have plunged 8.5% after it confirmed lower profits for last year and a drop in like-for-like sales in the first quarter of its new year. 

M&S is down 2.8% as it revealed the size of the estimated hit from the recent cyber attack and said some parts of the business will still be slowly recovering in the coming weeks.

Housebuilders are also lower, including Barratt Redrow and Taylor Wimpey.  

Top riser is Intermediate Capital Group (LSE:ICP), up 3.2% as it reported a 37% increase in profits for last year and hiked its dividend 10%. It's changing its name to ICG too.  

8am: Revolution Beauty receives takeover offer

Revolution Beauty Group PLC (AIM:REVB) said it has launched a formal sale process to "explore strategic alternatives" including being taken over, after it received a preliminary approach for a possible offer.

The make-up company said this move is part of a broader review of its funding structure and strategic options.

The company confirmed that the party making the approach has agreed to participate in the process, which is being managed by Panmure Liberum, and with any expressions of interest to be made by 11 June.

7.49am: JD Sports annual profits fall 4%, sales stumble in first quarter

JD Sports Fashion PLC (LSE:JD.) confirmed that profits fell 4% in the past year and that trading in the first quarter of its new financial year saw like-for-like sales down 2% but a "low" overall potential impact foreseen from US tariffs.

The trainers and sportswear retailer reported underlying profit before tax of £923 million for the 52 weeks to 1 February 2025, down 4% on the previous year.

It had said last month that profits were going to be within a range of £915-935 million.

Organic sales grew 3.1%, driven by a 5.1% contribution from new space, while LFL sales fell 2.0% and gross margin was in line with the prior period.

7.32am: M&S expects £300m impact from cyber attack

Marks and Spencer Group PLC (LSE:MKS) expects the recent cyber attack to have a £300 million impact on its new financial year, but this to only momentarily slow its progress after the past year saw its largest underlying profit in 15 years. 

The high street retailer said it is still working on recovering from what it called a "highly sophisticated cyber incident", with current efforts focused on restoring systems and operations over the rest of the first half.

Online disruption is expected to continue throughout June and into July as operations are restarted, with increased stock management costs in the second quarter.

For the past year ended 29 March, the group reported an adjusted profit before tax of £875.5 million for the , up 22% from the previous year, as sales rose 6.1% to £13.9 billion. 

7.13am: FTSE 100 expected to dip as inflation spikes 

The FTSE 100 has been called slightly lower on Wednesday after reaching a two-month high the day before, while the pound jumped as fresh UK inflation figures came in higher than expected.

London's blue-chip share index was expected to fall around five points, according to the futures market, having advanced almost 82 points yesterday to reach 8,781.1. 

Things could change before the open as UK inflation figures were published by the Office for National Statistics showing the consumer price index rose 1.2% month-on-month in April, up from 0.3% in March. 

This saw CPI rise 3.5% compared to a year ago, up from 2.6% the month before and higher than the 3.3% bump that economists expected due to US tariffs and other effects.  

The pound has climbed 0.3% to $1.343, around three-year highs. 

More on that in a bit, but back to stock markets for a second, as US markets finished lower overnight, with the S&P 500 and Nasdaq falling 0.4% and the Dow Jones dropping 0.3%, while the Russell 2000 was flat. 

Asian markets are mixed, with Japan's Nikkei in the red, but the Hong Kong Hang Seng up 0.5% and India's Sensex rising 0.8%. 

5.20am: What to watch on Wednesday 21 May

The cyberattack on Marks and Spencer Group PLC (LSE:MKS) will dominate investor thoughts as the retailer reports results on Wednesday, though the impact from the hack came after its year-end.

There are still likely to be lots of moving parts in the final results, with weekend headlines suggesting that with the M&S Online business still out of action after the cyber-attack, the FTSE 100 company is believed to have already breached its £100 million insurance cap.

Elsewhere in the retail sector, the big issue for JD Sports Fashion PLC (LSE:JD.) might be tariffs – where hopes have improved after the rapprochement between Washington and Beijing in recent weeks.

An update from the sportswear retailer last month helped pick the shares up off recent lows, though analysts say exposure to Nike remains a risk as the US giant makes up around half of group revenue.

The mooted bid for US retail rival Foot Locker has also increased interest in the shares.  

In the defence sector, helmets and breathing apparatus maker Avon Technologies PLC (LSE:AVON) impressed with its second-quarter update that showed orders from the US and Ukrainian armies, leading to earnings upgrades ahead of these interim results.

Announcements due:

Trading updates: 4imprint Group, Coats, Currys, Ithaca Energy, Regional REIT

Interims: Avon Technologies, IntegraFin Holdings

Finals: JD Sports Fashion, Great Portland Estates, Helical, HICL Infrastructure, Intermediate Capital Group, Marks & Spencer, RS Group, Severn Trent, SSE

Overseas earnings: American Eagle, Baidu, Best Buy, Lowe’s, Macy’s, Medtronic, Snowflake, Target, Urban Outfitters, Xpeng

Economic announcements: Inflation (UK), EIA Crude Inventories (US)