UK government bond yields – aka government borrowing costs – have dropped this morning, which is part of the reason why bond-like stocks like utilities are down.

Look at this chart of 2-year, 10-yr, 20-yr and 30yr gilt yields – all down today to what is the lowest in over a month.

Could this be linked to an open letter from former PM Tony Blair?

The 5,700-word essay from Blair’s eponymous institute is a scathing critique of Labour’s direction, arguing the party lacks a coherent governing plan rather than suffering from Keir Starmer’s leadership style.

Blair attacks flagship policies on net zero, tax and workers’ rights while warning Labour risks “playing with fire” by drifting left.

The intervention has fuelled speculation over whether Blair is positioning Wes Streeting as the preferred standard bearer of Labour’s modernising wing.

8.15am: FTSE starts with handbrake on

The FTSE 100 has started with the handbrake on, down just over three points at 10,488, as selling slightly outweighs buying.

Melrose Industries is leading the fallers again, down 2.8%, despite fire authorities in California lifting all evacuation orders last night, saying there is no longer a threat of explosion, fire or chemical leak for the damaged tank at the GKN Aerospace facility in Orange County.

Energy companies Centrica, SSE and Shell are next, down 2.2%, 1.5% and 1.4%, followed by Glencore.

Other utilities are down too, with National Grid, Airtel Africa, Severn Trest, BT Group and United Utilities down around 1.1-0.7%.

Grocers Tesco and Sainsbury’s have fallen as well, along with other defensive stocks such as tobacco giant BAT.

7.59am: Pets cuts dividend but launches buyback

Pets at Home Group has reported an acceleration in sales growth at its shops in the first weeks of its new financial year, as the pet care retailer backed market profit expectations for 2027 and rejigged its shareholder returns policy.

A “rebased” shareholder returns policy sees the dividend cut to 7.4p from 13p, with an increasing emphasis on share buybacks, starting with a £50 million programme over the next 12 months.

The FTSE 250-listed group said it was comfortable with analyst consensus forecasts for flat underlying pre-tax profit of £98 million for the 2027 financial year, roughly flat on last year, after reporting annual results largely in line with its most recent guidance.

7.34am: Energy price cap to bounce back

The UK energy price cap will rise by 13% from July after higher wholesale gas prices pushed up supplier costs.

Regulator Ofgem said the increase for the three months until September reflected volatility and higher wholesale prices in global gas markets stemming from the US and Israel’s war on Iran.

The price cap, which applies to default tariffs, will increase annual bills for a typical household from £1,641 up to £1,663 under updated consumption assumptions.

Households on fixed tariffs, around 40% of customer accounts or roughly 22 million households, will not be affected by the increase.

The Ofgem energy cap for the previous April-June quarter dropped 7% for the average dual-fuel household. This reduction was primarily driven by government Autumn Budget decisions to remove specific policy costs from household bills, despite an increase to cover network upgrades.

Market pre-open:

The FTSE 100 is seen starting in a low gear at the open, with oil prices hovering just below $100 a barrel as markets cross their fingers over US-Iran negotiations.

On the futures market, a fall of around 5 points is predicted for the London index, while larger gains of around 70 and 30 are expected for mainland European peers in Frankfurt and Paris.

The previous day, the FTSE was the only European benchmark to close in green, finishing up 25 points at 10,491.39, with its early efforts to catch up on the large gains on the Continent from Monday petering out by the end of the day.

On Wall Street overnight, trading was uneven, as the Dow Jones dipped 0.2% but the Nasdaq jumped 1.2% and the S&P 500 0.6% to a new all-time high, a large part due to a 19% surge for memory chip maker Micron Technology.

Asian markets are mixed this morning, with Korea’s Kospi up 3.7% and Japan’s Nikkei 225 rising 0.4%, both hitting record highs, while Hong Kong’s Hang Seng and China’s Shanghai Composite dropped 1.1% and 1.3%.

“It looks like geopolitical tensions are no longer bothering investors as much as they did in previous weeks,” says market analyst Ipek Ozkardeskaya at Swissquote.

“Iran’s explicit dissatisfaction regarding the progress in talks over its nuclear program – or even US strikes – didn’t reverse hopes that the war will end soon.”

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