The FTSE 100 ended Friday at 10,736.23, marking a 1.28% gain compared to the July 17 close. This rise, alongside the FTSE 250's second consecutive weekly advance, sets the stage for a pivotal week ahead as investors digest oil-driven earnings and a key Bank of England policy decision.
Bank of England and Fed Decisions
All 70 economists surveyed expect the Bank of England to maintain its benchmark rate at 3.75% on Thursday. The focus will be on the accompanying policy report and the vote split rather than the headline rate itself. Meanwhile, the Federal Reserve concludes its two-day meeting on Wednesday, with all 104 analysts surveyed predicting rates will stay at 3.50%-3.75%. However, 44 of 67 economists see a high likelihood of a future increase.
Energy Dominates Earnings
Initial estimates for the STOXX 600 indicate that energy accounts for roughly 62% of expected incremental earnings growth in the second quarter. According to London Stock Exchange Group data, headline earnings growth is projected at 17.3%, but excluding energy, this drops sharply to 7.2%. The energy sector alone is forecast to expand by 122.6%, contributing approximately 10.7 percentage points of the total rise. This concentration underscores how much the FTSE 100's performance hinges on oil prices and energy firms.
Brent crude finished Friday at $96.78, gaining nearly 10% for the week after briefly topping $100. The recent oil surge has pushed up inflation and bond yields, with the 10-year gilt yield settling around 5.05%. A temporary halt in US-Iran hostilities over the weekend could temper risk sentiment at Monday's open, while ongoing Houthi attacks on Saudi oil facilities continue to stoke supply concerns.
Key Corporate Results
A busy week of earnings includes major reports from AstraZeneca, Vodafone, Barclays, GSK, Unilever, Rio Tinto, Glencore, Shell, Lloyds, Rolls-Royce, and others. Shell's results will be a direct test of profit concentration, though the quarter ended before July's oil price rally, so investors may focus more on outlook and cash returns. Rio Tinto, Glencore, and Anglo American will provide broader commodity demand signals.
Rolls-Royce is another key indicator of the rally's breadth. Early estimates point to first-half operating profit of around £1.9 billion, up roughly 10%, with management guiding full-year profit of £4.0-£4.2 billion.
Economic Data and Sterling
UK retail sales rose 1.0% in June, beating expectations of a 0.3% decline. The composite PMI for July improved to 52.1 from 49.3. However, S&P Global economist Chris Williamson cautioned that part of the factory upturn may prove short-lived. Sterling closed Friday near $1.3318, down about 1% for the week. A weaker pound boosts the value of overseas revenues, but elevated bond yields strain interest-rate-sensitive sectors like housebuilders.
British companies now expect price increases of 3.9% over the next year, down from 4.1%, while wage growth expectations slipped to 3.4%. Investec economist Ellie Henderson described the outlook as "extremely fluid" and continues to predict no rate change this year.
Outlook
The most significant indicator this week will be whether non-energy firms can keep pace with the profit surge driven by oil. Shell's outlook and the BoE's statements on inflation are expected to offer the most definitive insight. A lasting truce could rapidly reverse energy trade gains, while fresh attacks could push inflation, yields, and airline fuel costs higher, threatening one side of London's market divide.
