FTSE 100 today: Index climbs amid Eurozone CPI data, Bailey flags rate uncertainty

Investing.com -- British stocks closed slightly higher on Tuesday, while European indices were mixed after data showed eurozone consumer prices rose less than expected in May.

The blue-chip index FTSE 100 rose 0.1% and the British GBP/USD fell 0.2% against the dollar to below 1.3520. 

Meanwhile, DAX index in Germany gained 0.6%, the CAC 40 in France rose 0.3%.  

Eurozone inflation eases

Inflation in the eurozone cooled in May, potentially giving the European Central Bank more flexibility to lower interest rates at its upcoming meeting.

Consumer prices increased by 1.9% year-on-year, easing from 2.2% in April and aligning with market forecasts, while slipping just below the ECB’s 2% target.

BoE’s Bailey flags uncertain rate path 

Bank of England Governor Andrew Bailey told lawmakers on Tuesday that the outlook for interest rates remains downward, but growing global trade tensions have added fresh uncertainty to the timing and scale of cuts.

Appearing before the Treasury Committee, Bailey said the central bank’s path was “clouded” by external risks.

Deputy Governor Sarah Breeden, also speaking at the hearing, said she saw grounds for a rate cut even before factoring in recent trade-related concerns.

Meanwhile, policymaker Swati Dhingra warned of possible downside risks to the U.K.’s inflation trajectory, noting that the recent uptick was likely driven by higher energy costs rather than underlying economic imbalances in supply and demand.

U.K. trade minister to meet U.S. counterpart 

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U.K. Trade Secretary Jonathan Reynolds is scheduled to hold talks with U.S. Trade Representative Jamieson Greer on Tuesday, focusing on the implementation of a trade agreement complicated by Washington’s recent steel tariffs.

The discussion is part of Reynolds’ three-day visit to Paris and Brussels, where he will assess existing trade arrangements with officials from both the U.S. and EU - Britain’s top trading partners.

OECD urges U.K. to step up debt cuts

The Organisation for Economic Cooperation and Development (OECD), headquartered in Paris, called on the U.K. government to strengthen its measures to reduce borrowing and debt.

This recommendation precedes Finance Minister Rachel Reeves’ upcoming announcement on long-term fiscal plans.

The OECD highlighted the need for cautious fiscal management amid easing monetary policy and urged accelerated efforts to rebuild financial buffers given tight budget conditions and significant risks to economic growth.

Rating changes on U.K. companies

HSBC Holdings (NYSE:HSBC) PLC (LON:HSBA) was downgraded by Citi Research from “buy” to “neutral,” with its price target lowered from 960 GBp to 930 GBp in a note released Tuesday.

Meanwhile, RBC Capital Markets raised EasyJet PLC’s (LON:EZJ) rating to “outperform” from “sector perform” and increased its price target to 650p from 570p, anticipating stronger profit growth for fiscal 2026.

Shares of Rio Tinto (NYSE:RIO) declined 2% in U.S. premarket trading Tuesday after Jefferies downgraded the mining company to “hold” from “buy,” adjusting its price targets downward to 4,600p from 5,700p for U.K.-listed Rio Tinto PLC (LON:RIO) and A$115 from A$147 for Rio Tinto Ltd (ASX:RIO), citing emerging challenges and a more balanced risk-reward outlook.

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BAT sees slight beat on H1 revenue

British American Tobacco (NYSE:BTI) PLC (LON:BATS) said it expects first-half revenue to slightly exceed earlier forecasts, driven by momentum in its U.S. operations and strong performance in its modern oral segment, especially Velo.

The company anticipates a 1% to 2% increase in revenue for both the first half and full year, based on constant currency.

Adjusted operating profit is projected to rise between 1.5% and 2.5% in 2025, with a greater contribution expected in the second half as new product launches ramp up.

Chemring reports strong H1 earnings

Chemring Group PLC (LON:CHG) reported first-half earnings in line with board expectations and confirmed its full-year outlook, lifting shares by about 1% in early London trading.

Order intake jumped 42% year-over-year to £488 million, pushing the order book to a record £1.3 billion, while revenue grew 5% to £234.3 million and underlying EBITDA rose 12% to £40.4 million.

The company expects second-half operating profit to match last year’s level and has secured around 85% of its projected 2025 revenue in the order book as of April’s end.

Pennon Group hit by restructuring, capex costs

Pennon Group (LON:PNN) posted a £72.7 million statutory pre-tax loss for the year ended March 31, weighed down by higher capital spending and restructuring costs despite stronger revenue.

Group sales rose 15% to £1.05 billion, aided by the full-year addition of SES Water, while adjusted EPS was a negative 10.3p. The board announced a dividend of 31.57p per share, up 3.4% year-on-year.

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Looking ahead, Pennon expects a sharp EBITDA increase in FY25–26, along with higher depreciation and interest costs as investment ramps up. Capital expenditure is projected between £710–£740 million, and regulated revenue is forecast to grow by up to £240 million.

Thames Water loses KKR as equity partner

KKR & Co (NYSE:KKR). has exited the equity fundraising process for Thames Water, ending its role as the preferred partner, the utility said Tuesday.

Thames Water now plans to move forward with senior creditors’ proposals in coordination with Ofwat and other key stakeholders.

Gleeson Homes set to miss profit forecasts

U.K.-based MJ Gleeson (LON:GLEG) said its Gleeson Homes division is likely to post an annual operating profit 15%–20% below forecasts, due to rising build costs and flat selling prices.

The company also pointed to a scrapped land sale as a factor weighing on profitability.

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