10th Sep 2026 17:10
(Alliance News) - Stock prices in London closed lower on Thursday, as oil prices surged above USD105 and hotter-than-expected US producer inflation fuelled concerns, while the European Central Bank raised interest rates as expected.
The FTSE 100 index closed down 61.14 points, 0.6%, at 10,608.92. The FTSE 250 ended down 222.72 points, 0.9%, at 23,885.94, and the IM all-share closed down 8.30 points, 1.0%, at 787.95.
The Cboe UK 100 was down 0.5% at 1,054.91, the Cboe UK 250 was down 0.9% at 20,704.12, and the Cboe small companies was down 0.5% at 18,551.52.
In European equities on Thursday, the CAC 40 in Paris closed down 0.5%, while the DAX 40 in Frankfurt ended down 0.7%.
Brent oil was quoted at USD105.51 a barrel at the time of the London equities close on Thursday, up from USD101.07 late Wednesday.
Oil prices surged as intensifying tit-for-tat military action between the US and Iran fuelled concerns over disruptions to global energy supplies, adding to inflationary fears already weighing on markets.
Inflation concerns were also fueled by the European Central Bank's latest projections and hotter-than-expected US producer price data.
The euro stood at USD1.1625 at the time of the London equities close on Thursday, down from USD1.1639 on Wednesday, after the ECB raised interest rates for the second time this year.
The Frankfurt-based central bank lifted its three key interest rates by 25 basis points, taking the deposit facility rate to 2.50%, the main refinancing operations rate to 2.65% and the marginal lending facility rate to 2.90%.
The move was widely expected, with the ECB warning that the US war on Iran continues to generate inflationary pressure and is likely to keep price growth above its 2% target for an extended period.
ECB President Christine Lagarde said the decision was unanimous and described the rate increase as a "no-brainer", but stressed that policymakers did not discuss any future rate decision.
The ECB's latest staff projections forecast headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028.
The 2026 forecast was unchanged from June, while the projections for both 2027 and 2028 were revised higher. Excluding energy and food, inflation is forecast at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028.
More positively, the central bank upgraded its economic growth forecasts, citing greater-than-expected resilience in the eurozone economy.
Gross domestic product is now expected to grow 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. The forecasts for 2026 and 2027 were revised higher from June.
Stocks in New York were lower. The Dow Jones Industrial Average was down 0.4%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 0.4%.
Global bond yields surged as intensifying inflation concerns, fuelled by rising oil prices and hotter-than-expected US producer price data, prompted investors to reassess the interest rate outlook.
The yield on the US 10-year Treasury was quoted at 4.92%, widening from 4.81%. The yield on the US 30-year Treasury was quoted at 5.34%, widening from 5.26%.
US producer price inflation accelerated by more than expected in August, data showed on Thursday, ahead of Friday's consumer price index reading and next week's Federal Reserve interest rate decision.
The Bureau of Labor Statistics said producer prices rose 5.4% year-on-year in August, accelerating from 4.8% in July and topping the FXStreet-cited forecast of 5.3%.
Back in London, Associated British Foods sank to the bottom of the FTSE 100, losing 7.9%, as weaker-than-expected sales at Primark overshadowed plans to launch home delivery at the retail chain.
The summer heatwave in the UK and Europe also weighed on parts of AB Foods' Grocery business.
Industrial metal prices, particularly copper, fell sharply, dragging London-listed miners lower. Antofagasta lost 5.7%, Anglo American fell 4.9% and Glencore shed 4.1%.
Tobacco maker Imperial Brands topped the FTSE 100, up 1.8%, followed by British American Tobacco, up 1.5%.
On the FTSE 250, THG, the parent company of Lookfantastic, Cult Beauty and Myprotein, fell 13% to the bottom of the index, as a warning over new European Union parcel duties overshadowed a strong first-half profit performance.
The company said it expects third-quarter revenue growth of around 2%, with sales affected by the European heatwave, the introduction of EU duties for THG Beauty from July 1 and the phasing of own-brand beauty revenue into the fourth quarter and financial 2027.
THG expects these factors to be one-off in nature, while third-quarter earnings and cash generation are expected to remain in line with expectations and "robust".
Among smaller caps, Empyrean Energy jumped 80% after announcing the completion of the Duyung farm-down, which it described as a major milestone for Empyrean and the Mako gas project.
Eleco surged 70% after the software provider focused on the construction and built environment sectors accepted a GBP200 million takeover offer from Accel-KKR.
The pound was quoted lower at USD1.3532 at the time of the London equities close on Thursday, compared to USD1.3554 on Wednesday. Against the euro, sterling fell to EUR1.1636 from EUR1.1644 a day prior. Against the yen, the dollar was trading at JPY154.10, slightly up from JPY154.09.
Gold was quoted lower at USD4,363.96 an ounce on Thursday, against USD4,420.33 on Wednesday.
The biggest risers on the FTSE 100 were Imperial Brands, up 45.00p at 2,488.00p, British American Tobacco, up 62.00p at 4,092.00p, Vodafone Group, up 1.85p at 128.65p, BP, up 8.00p at 565.10p and Compass Group, up USD0.43 at USD30.96.
The biggest fallers on the FTSE 100 were Associated British Foods, down 160.00p at 1,860.00p, Antofagasta, down 227.00p at 3,771.00p, Anglo American, down 203.00p at 3,972.00p, Glencore, down 25.70p at 599.70p and M&G, down 12.80p at 332.20p.
On Friday's economic calendar are UK gross domestic product, trade balance, industrial production and manufacturing production figures.
UK GDP is due at 0700 BST, with consensus expecting the economy to have been flat month-on-month in July following 0.3% growth in June.
The UK goods trade deficit is expected to have widened to GBP22.3 billion, while industrial production is forecast to have declined 0.2% month-on-month in July, matching the fall in June.
Elsewhere on Friday's economic calendar are Japanese producer price inflation, US consumer price inflation and the US monthly budget statement.
On Friday's UK corporate calendar, Berkeley Group Holdings issues a trading statement, while Integrated Diagnostics Holdings reports half-year results.
By Eva Castanedo, Alliance News senior economics reporter
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