​​Morning update: UK inflation rise puts pressure on FTSE 250​

​​​FTSE 100 flat in early trading

​A surge in inflation has put the brakes on the FTSE 100's rally, though the index continues to hold on at the highest level since 6 March.  

​Key updates from this morning have included Marks & Spencer (M&S), which expects the cyber attack to cost it £300 million in operating profits, but also announced a 20% boost to the dividend. The shares wobbled in early trading but succeeded in clawing back losses by mid-morning. JD Sports added to the retail theme, but here there was a much more negative reaction, and the shares opened deep in the red. Pre-tax profits were down a touch, but a warning about the impact of tariffs on its US business weighed heavily on the share price.  

​Notably the FTSE 250 was under more pressure following the UK inflation print, which beat forecasts thanks to the impact of higher energy prices and a rise in employer taxes. UK consumers face a much gloomier outlook for the coming months, and the mid-cap’s UK’s focused companies may well start to feel the pinch too in future earnings reports.

​Oil prices up on Israel-Iran tensions

​CNN reported last night that the US was carefully monitoring the situation in the Middle East for a possible strike on Iran by Israel. Hopes of a US-Iran deal have faded rapidly, and without this reassurance it is possible we will see Tel Aviv take action against Iranian nuclear facilities, a dramatic escalation of the standoff between the two powers.

​A volatile week for oil has seen the price slump on hopes of a US-Iran deal, but then rally on last night’s news. WTI briefly touched $64, its highest level in a month.

​Weaker open expected for the US 

​Yesterday’s US session ended with losses for the major indices and a rise in the volatility index (VIX). More losses are expected on the open today, as the rally struggles to maintain short-term momentum.  

​US retailers report today, including Target and Lowe's, and with the market continuing to look frantically for signs of tariff-related price increases, comments from these retailers will be scrutinised closely. President Trump warned Walmart earlier in the week about not increasing prices to offset the impact of tariffs, and these names may also find themselves under fire from the White House if their comments are viewed as being too ‘political’.  

​Japanese exports to the US dropped in April according to data released overnight, and this put pressure on Japanese equities. A deal between the two nations has continues to look less likely ahead of July elections in Japan, and the Nikkei 225 continues to take a hit as a result. This might provide a foretaste of what will happen to US indices should further trade deals fail to materialise.