Market Report: UK higher at the open, oil rally runs out of steam
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “UK stocks opened higher this morning, tracking a reasonably positive start across most of Europe. With few major catalysts on the calendar, trading is likely to stay range-bound, as investors digest results from troubled housebuilder Vistry and a slightly soft trading update from BP.
US markets had a choppy session last night. Well-behaved inflation gave an early boost, with core CPI coming in at 2.6% versus the 2.7% expected, supporting hopes for at least two rate cuts this year. Bond yields dipped on the news, but equities couldn’t hold their morning gains, finishing the day mostly flat, as the S&P closed just shy of a record high. Energy stocks shone on rising crude prices amid Middle East tensions, while banks lagged after JP Morgan’s earnings beat was overshadowed by concerns over potential rate caps on credit cards.
Software giant Salesforce was the biggest drag on the US market yesterday, tumbling 7% despite no company-specific news. The sell-off appears linked to buzz around Anthropic’s new “Claude Cowork” tool, which can connect to apps like Slack and automate complex tasks with simple prompts – raising fears that the value proposition for traditional software products could erode over time. Enterprise software was already under pressure last year as investors worried that AI could upend the traditional “pay-per-seat” model for big software names. With those concerns still lingering, sentiment doesn’t look ready to rebound just yet.
Oil prices have met their match with Brent down 0.7% this morning, ending a four-day rally as Venezuela resumed exports under a new deal with the US. The pullback was limited, though, with prices still near three-month highs amid mounting supply risks from Iran, where protests and cancelled talks with Washington threaten roughly 3.3 million barrels per day of output.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “It was hard for Vistry to disappoint markets more than it did in 2024, when it issued three profit warnings in as many months. Vistry’s 2025 full-year results weren’t the finished product, but investors will take slight comfort knowing it was a step in the right direction.
Its partners remained cautious over the first half of 2025. Partner-funded demand strengthened slightly in the second half, supported by a more favourable government policy environment for affordable housing, where Vistry specialises. All in, that saw revenue remain flat year-on-year, as a slowdown in house sales was offset by a small uptick in selling prices and £200mn worth of land sales. With the top line stuck in the mud, Vistry leaned into its enormous scale to negotiate hard on prices with suppliers, which has helped profits return to growth territory.
While Vistry is better-positioned than most to benefit from the government’s pledge to invest an unprecedented £39bn in affordable housing over the next decade, it’s likely to be a slow-burning opportunity rather than a quick win. The group’s partnerships model also tends to have a lower margin than ordinary housebuilding projects. While selling these houses in bulk deals to partners brings more cash in the door in one go, it puts downward pressure on selling prices, meaning there’s little room for error. The balance sheet isn’t in the best of shape, so dividend payments and share buybacks aren’t a priority for now. Potential investors will need a lot of patience if they want to back this horse, and there looks to be better ways to play the UK housing market as things stand.”