UK retail stocks tumble as Deutsche Bank cuts ratings, French market drops on political fears – business live | Stock markets

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UK retailers shares fall as easy street turns into “hard yards”, says Deutsche

UK retail stocks are selling off this morning after a downbeat note from analysts at Deutsche Bank.

Associated British Foods, which owns Primark as well as a range of other food and drink brands such as Twinings, has fallen by 5% this morning, after analysts at the bank downgraded their view on the stock from a neutral “hold” to “sell”.

Deutsche also downgraded its view on home improvement retailer Wickes to a “sell”, with its shares falling by as much as 9% this morning, making it the worst laggard in the mid-cap FTSE 250 index today.

B&Q owner Kingfisher was moved down from a “buy” to a “hold” rating, sending its shares down by as much as 4% this morning.

Adam Cochrane and Benjamin Yokyong-Zoega, of the bank, said:

We are taking a more cautious view on the UK consumer. The end of 2024 and early 2025 are likely to have been the sweet spot with real wage growth set to slow and fear of unemployment set to build from here.

Our Household Cash Flow model shows discretionary spending lagging spending power and, unless consumers reduce savings, there will be a 4ppt slowdown in discretionary spend to +3% in 2H from +7% in 1H.

Retail sales have been resilient into Q2 helped by warm weather although there is some variance by category. Consumer confidence metrics remain subdued and our new DB “Fear Index” suggests things may be getting worse.

The bank also lowered its target prices for Dunelm and Marks & Spencer, although still retained their “buy” ratings on the stocks. The shares are down 0.6% and 0.5% respectively this morning.

Key events

Sundus Abdi

UK tech firm Filtronic has announced its biggest ever contract worth £47.3m with Elon Musk’s SpaceX.

Shares in the County Durham-based defence and telecoms equipment maker rose nearly 5% on Tuesday after the announcement. The contract covers supply of a type of radio frequency tech designed for high-performance wireless communication, using next-generation gallium nitride (GaN) E-band technology.

Nat Edington, Filtronic CEO, said:

We are extremely proud to announce this landmark contract, which not only sets a new commercial record for Filtronic, but also reflect the success of our partnership with world-leading satellite company SpaceX, supporting the Starlink constellation.

It comes after Filtronic announced a £16.8 million contract in February with the US aerospace firm.

Bank of England’s Mann “ready for a forceful policy action”

The Bank of England policymaker Catherine Mann has said that while she think it is appropriate to hold interest rates at their current level, she stands ready to cut forcefully if there are serious risks to economic growth.

Catherine Mann, a member of the Bank Of England Monetary Policy Committee Photograph: Bloomberg/Getty Images

Mann, who will appear at the Future of Central Banking conference at the Banco de México today, will say in a speech:

A more persistent hold on Bank Rate is appropriate right now, to maintain the tight (but not tighter) monetary policy stance needed to lean against inflation persistence persisting. However, I stand ready for a forceful policy action, in the form of larger, more rapid Bank Rate cuts, should the downside risks to domestic demand start materializing.

The Bank of England’s monetary policy committee cut interest rates to 4% earlier this month, in line with projections of falling inflation over the next two years. However, several of its members, including Mann, voted to hold interest rates until the trend became clearer.

She will say in her speech today:

In my assessment, the scenario outlining upside risks to inflation through inflation persistence (which included additional second round effects in domestic price and wage-setting, amplified by weak potential productivity growth) is playing out, whereas the ‘downside risk to demand’ scenario remains a risk and is not my central case.

Debenhams pre-tax losses widen, explores PLT sale

Full year results for Debenhams have just landed: revenue fell 1% in the year ended in 28 February to £790.3m, while its continuing loss before tax widened from £164.4m in its last financial year to a loss of £263.9m.

However, shares in the retailer, which also owns brands boohoo and Karen Millen, are up by 2.2%. Investors are taking confidence in the fact that the company says all of its brands are now trading profitably in terms of adjusted Ebitda, and that it expects this measure of profit to be higher in its next half compared with the year prior.

The company also said it is exploring a potential sale of PrettyLittleThing, the fast fashion brand aimed at young women, as part of its business review.

Dan Finley, who has been chief executive of the group since November, said:

The business has been through a very challenging period which is reflected in these results. I want to assure shareholders that the business is taking the necessary actions, quickly and decisively, to address the challenges that we face. No stone will be left unturned.

…We are focused on delivering on the huge opportunity ahead for the Debenhams brand. Work is progressing to reposition and right size the Youth Brands, with a laser focus on profitability and cash generation under new management.

This will be a multi-year turnaround as was the case with the Debenhams brand. As part of our ongoing business review, we are exploring a potential sale of PLT. We are also assessing long-term options for our US and Burnley distribution sites to enhance efficiency and ensure alignment with our stock-lite strategy.

A strikes by hold baggage screeners at Gatwick airport scheduled for the end of this month has been called off, after workers voted to accept an improved pay deal.

The workers, employed by ICTS, will receive a 7% pay rise back paid to April 2025, the Unite union said.

The deal means that strikes scheduled from 29 August to 2 September will now not take place.

US long-term bonds fall, stock market poised to open lower as Trump attacks Fed

The yield on the 30-year US Treasury has risen by 0.022 percentage points to 4.909%, as investors worry that Donald Trump’s latest attempt to intervene with the Federal Reserve could undermine the independence of the American central bank.

Meanwhile, the yield on the two-year Treasury has dropped by 0.028 percentage points to 3.694%, as investors expect that pressure from the US president could lead to faster rate cuts.

The market is pricing in an 82% chance of a cut in mid-September, when the rate-setting Federal Open Market Committee is next scheduled to meet.

The US stock market looks like it will fall slightly at the open, with futures for the blue chip S&P 500 index down by 0.06%, and futures for the Nasdaq down 0.03%.

The blue-chip FTSE 100 index is trading down 0.5% so far today. B&Q owner Kingfisher is the worst performer in the group, with its shares down 4.1%. Primark owner Associated British Foods is a close second, down 3.8%, after a downbeat note from analysts at Deutsche Bank about the outlook for British retail.

The mid-cap FTSE 250 index is also down by 0.9%, led by an 8% drop at home improvement retailer Wickes.

Distributor Bunzl is the best performer in the FTSE 100, with its shares up 5% after it told investors that it would restart its share buyback programme. British American Tobacco is among the worst performers, down 2.5%, after it told investors this morning that its chief financial officer, Soraya Benchikh, will step down from her role effective today.

Entry-level vacancies hit five-year low

Vacancies for entry-level jobs have hit their lowest level in five years, according to the job search site Adzuna.

The proportion of new entry-level jobs has dropped to just over a fifth of the overall market, it found, its lowest share since 2020.

The number of overall vacancies dropped 1.2% in July to 864,705, Adzuna found. Graduate jobs nudged up 2.5% against June, but are still down 28% compared with the same time last year.

Salaries for listed jobs also fell by 0.3%, as competition for work has heated up: there are now roughly 2 jobseekers per vacancy, Adzuna said.

Andrew Hunter, co-founder of Adzuna, said:

After a hopeful uptick in June, July saw the pendulum swing back with vacancies falling again. While salary growth remains one of the few consistent positives – continuing to outpace inflation – hiring appetite is clearly uneven.

The ongoing strength in sectors like construction is in stark contrast to another consecutive monthly drop in healthcare roles – traditionally one of the most stable sectors. This speaks to a market still finding its footing. Until we see greater stability across the board, it’s likely this stop-start pattern will continue.

Vacancies in healthcare have dropped 25.4% since April, when the government changed the rules for employer national insurance contributions and the minimum wage.

The decline in entry-level jobs come as official figures show the number of young people not in education, employment or training (Neet) has leapt by more than a quarter in the past five years to reach almost 1 million.

Liz Kendall, the work and pensions secretary, told my colleague Richard Partington that Labour has a “mountain to climb” to bring down the numbers:

Graeme Wearden

The cost of insuring French government debt against default has risen today, but remains extremely low.

Data from S&P Global show that the cost of a five-year French credit default swap has risen to 37 basis points, the highest since May, Reuters reports.

That level indicates there’s very little chance of France defaulting.

For comparison, during the eurozone debt crisis of 2015, Greece’s 5-year credit default swaps rose over 1,900bps, amid heightened fears that Athens could default on its debts.

One in four UK late-night venues have closed since 2020, figures show

There’s also gloom in the UK hospitality sector, where late-night venues have been closing at an alarming rate.

More than one in four late-night venues have shut their doors since 2020, according to new data from the Night Time Industries Association (NTIA), who are calling on the government to cut VAT, reverse the increase in employers’ national insurance contributions, and maintain business rates relief for the sector.

More here:

Wood Group edges closer to takeover deal

Mark Sweney

Wood Group has come a step closer to becoming the latest company to leave the London Stock Exchange, after the board of the British oil services company said it was minded to accept a reduced takeover offer from a Dubai-based suitor.

Sidara, the Middle Eastern engineering company, initially proposed a 35p-a-share offer in April.

However, on Tuesday the company said that having completed due diligence Sidara would make a lower offer of 30p a share, once remaining preconditions had been met.

The FTSE 250-listed company said it had evaluated the new offer with its financial advisers and concluded that it was “at a value the board would be minded to recommend to shareholders”.

As a result the deadline for Sidara to announce a firm intention or withdraw its offer has been extended, again, to 5pm on 28 August.

UK retailers shares fall as easy street turns into “hard yards”, says Deutsche

UK retail stocks are selling off this morning after a downbeat note from analysts at Deutsche Bank.

B&Q owner Kingfisher was moved down from a “buy” to a “hold” rating, sending its shares down by as much as 4% this morning.

Adam Cochrane and Benjamin Yokyong-Zoega, of the bank, said:

We are taking a more cautious view on the UK consumer. The end of 2024 and early 2025 are likely to have been the sweet spot with real wage growth set to slow and fear of unemployment set to build from here.

Our Household Cash Flow model shows discretionary spending lagging spending power and, unless consumers reduce savings, there will be a 4ppt slowdown in discretionary spend to +3% in 2H from +7% in 1H.

Retail sales have been resilient into Q2 helped by warm weather although there is some variance by category. Consumer confidence metrics remain subdued and our new DB “Fear Index” suggests things may be getting worse.

The wobble in the UK bond market also follows a high reading for food inflation from the British Retail Consortium.

It found that shop prices had risen at their fastest pace for 18 months, with food inflation hitting 4.2% in August. That was driven by a jump in the cost of grocery staples such as eggs and butter, the industry body said.

Helen Dickinson, chief executive of the BRC, said the rapid rise added to the pressure on people already struggling with the cost of living.

Staples such as butter and eggs saw significant increases due to high demand, tightening supply, and increased labour costs.

Chocolate also got more expensive as global prices of cocoa remain high owing to poor harvests.

UK gilts falling, pound slips

UK bonds are falling this morning: the yield on the two-year gilt rose by as much as 6 basis points to 4.008%, while the yield on the 30-year gilt also rose by 5.634%, its highest point since April. Bond yields rise when prices fall.

It follows a rise in US Treasury yields after Donald Trump ordered the removal of Lisa Cook from the board of governors on the Federal Reserve, the US central bank.

The sell-off in the bond market also follows reports over the weekend that the UK is facing an “IMF bailout”. Jagjit Chadha, a professor of economics at the University of Cambridge and former head of the National Institute for Economic and Social Research, claimed the economy was at risk of “collapse”.

He said the financial situation was “as perilous the period leading up to the IMF loan of 1976”, when Britain had to be bailed out by the global banking body.

He told the When the Facts Change Substack, written by Liam Halligan:

I’m in a world in which I could imagine it [an IMF bailout] happening, and we’ll be bereft in that case.

We will not be able to roll over debt, we will not be able to meet pensions payments, benefits will be hard to pay out.”

The pound is also a bit weaker this morning, down by 0.01% against the US dollar to $1.3456.

European stock markets open lower

European shares are broadly down this morning, with the European Stoxx 600 index down by 0.7%.

That was led by France’s Cac 40 index, which has dropped by 1.4%, mirroring a fall in its bond market.

The UK’s blue chip FTSE 100 index is down by 0.6% this morning, with Associated British Foods, the owner of Primark, the biggest faller, down 3.9%.

Meanwhile, the German Dax index has dropped 0.9%, while the Italian FTSE MIB has fallen by 1.2%.

French bonds fall on political uncertainty

Political uncertainty in France is shaking its bond market, with its 10-year bond yield rising by as much as 2 basis points this morning to trade around 3.51%, its highest level since March. Bond yields rise when prices fall.

It comes after Prime minister François Bayrou called a confidence vote that could topple the French government next month, as he tries to find support for plans to shore up the government’s ailing public finances.

Bayrou has said France is going through a “decisive moment”. If the government secures a majority in the confidence vote, it would be confirmed, he said, but “if it does not have a majority, the government will fall”.

🇫🇷 🇮🇹 More French political turmoil may be enough to push yields on French bonds above those on Italian bonds – Bloomberg pic.twitter.com/oDWidwSD7C

— Christophe Barraud🛢🐳 (@C_Barraud) August 26, 2025

Charlotte de Montpellier, senior economist at the broker ING, says the “obstacle is almost impossible to overcome”.

Bayrou’s centrist coalition holds just 210 of 577 seats in the Assembly. The far-right RN, far-left LFI, Greens, and Communists—together 264 MPs—have already declared they will vote against him. Only the Socialist Party could tip the balance, but early signals suggest they are unwilling to support the government without major revisions to the budget, which seems unlikely.

…If Bayrou loses the vote, President Macron will face a difficult choice: appoint a new prime minister capable of forming a government in a fragmented Assembly, or dissolve Parliament and call new elections—something he has previously ruled out. Either path would inject fresh uncertainty into an already fragile political landscape.

The likely fall of the government will weigh heavily on the French economy. With only 0.8% GDP growth expected this year, the economy was already weak, and the political crisis adds a new layer of uncertainty. Drafting and passing a 2026 budget will become even harder, delaying fiscal consolidation and potentially worsening France’s debt trajectory. The longer reforms are postponed, the greater the eventual adjustment will need to be.

In short, France’s political instability is becoming an economic liability. Investors and institutions will be watching closely—not just for what happens on 8 September, but for what comes next.

Closer to home, there are a few corporate updates after the bank holiday. Soraya Benchikh, chief financial officer at British American Tobacco, is stepping down today, the company said in a statement. Javed Iqbal will act as the interim CFO until the company appoints a permanent successor.

Meanwhile the FTSE 100 distribution group Bunzl has reported that its first-half sales rose by 0.8% to £5.76bn, in line with expectations. Pre-tax profit fell by 10.5% to £250.2m in the six months ended in June. However, the company said it would resume the remaining £86m of its previously announced £200m share buyback, after pausing it in April.

Trump’s attempt to intervene at the Federal Reserve has spooked investors, with gold, which is viewed as a safe haven asset, rising this morning. Economists at Deutsche Bank write:

Gold spiked by +1% and is holding on to most of this overnight gain, while futures on the S&P 500 (-0.14%) and the Nasdaq (-0.18%) are modestly lower.

Meanwhile, the Treasury curve has seen a sizeable steepening, with the 2yr yield trading -0.7bps lower but the 10yr up +2.9bps and the 30yr +4.5bps to 4.93%. This has brought the 2s30s slope to 122bps, its steepest since January 2022 when the Fed had not yet started its post-Covid hiking cycle.

Cook’s removal could help Trump’s push for lower interest rates

Cook’s removal could push the Fed to a more dovish stance, say economists at Deutsche Bank. They write:

Were Cook’s dismissal to hold, it would open up another seat for Trump to fill on the seven-person Federal Reserve Board. With Stephen Miran nominated for the seat recently vacated by Governor Kugler and with Governors Waller and Bowman dissenting in favour of a rate cut at the July meeting, this would increase the prospects of a dovish majority on the Board.

Cook, who was appointed by President Joe Biden in 2022, was working a term that was not due to expire until 2038. If she were to be removed, it would give Trump the change to secure a four-person majority on the Fed’s board of governors.

Market bets suggest there is an 82% chance that the Fed will vote to cut its key interest rate at its next meeting in mid-September. However, economic data coming out this week on inflation and the labour market could still sway the decision.

Here is Justin Wolfers, an economics professor at the University of Michigan, drawing a parallel with Turkey’s president Recep Tayyip Erdoğan.

Introduction: Trump escalates attack on Federal Reserve in move to fire governor

Donald Trump has moved to oust Lisa Cook, a governor at the Federal Reserve, in his latest attack on the American central bank.

It is an unprecedented intervention by a US president, which threatens to undermine the independence of the central bank of the biggest economy in the world.

Trump posted a letter on his social media platform Truth Social on Monday, claiming he had “sufficient cause” to fire Cook, based on allegations she made false statements on one or more mortgage loans.

Cook, who is the first black woman to serve on the Fed Board in Washington, has sad that Trump has no authority to fire her and that she will not quit.

She said:

I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.

The news has spooked markets, with the US dollar and long-dated Treasuries both falling on Tuesday. The US dollar index, which tracks the greenback against a basket of other major currencies, fell by 0.1%.

Trump’s latest attack on the Fed follows “relentless pressure” on Fed Chair Jerome Powell, notes Tony Sycamore, of the broker IG. He says:

In the short term, the removal of Cook who has tended to vote with the FOMC majority, increases the likelihood of a Fed rate cut at the September FOMC meeting. A prospect expected to weigh on the US dollar and lend support to equities and other risk assets, including Bitcoin.

However, beyond the “sugar hit” of a rate cut in September, recent developments around key Fed personal, heighten concerns over rising political interference, raising the risk that traders view the Fed as politically compromised.

This could trigger a rerun of the “Sell US assets” theme seen earlier this year. In such a scenario, both the US dollar and US equities could experience sharp declines.