The FTSE 100 closed Thursday up 165 points at 10,378 – a gain of 1.62% – with Rolls-Royce providing most of the engine power after its first-quarter trading update reassured investors who had grown restless during a difficult start to the year.
Shares in the aerospace giant surged close to 7%, making it the single biggest lift to the index on the day. The group reaffirmed its full-year targets, pointing to underlying operating profit of £4.0bn to £4.2bn and free cash flow of £3.6bn to £3.8bn, with large engine flying hours now running at 115% of 2019 levels – up 5% on the prior quarter.
CEO Tufan Erginbilgic said the company aims to absorb any financial drag from Middle East disruption through internal actions, a line analysts at Jefferies called reassuring given current uncertainty around air traffic.
United Utilities surges to all-time high
Water companies were the other standout story. United Utilities jumped 11.2% to a record high after laying out plans to extend its investment remit beyond pipes and reservoirs into housing, data centres and clean energy, backed by an £800 million equity raise.
The move expands the group’s investment programme from £9bn to £11.5bn and lifts its targeted regulatory returns to 10-11%, roughly 100 basis points above previous guidance. Severn Trent followed it higher, up 5.9%, on the reasonable assumption that it might pursue a similar path.
Gold miners and energy shares benefit from oil surge
Brent crude climbed sharply through the day, at one point touching $126 a barrel as fears over the US-Iran conflict and potential disruption to the Strait of Hormuz continued to build.
That pushed gold prices higher in tandem, benefiting Endeavour Mining, which rose 4% after reporting record quarterly free cash flow of $613 million – equivalent to $2,176 per ounce produced – and signalling it could more than double its minimum shareholder returns commitment for 2026. Hochschild added 5.1%, while Shell and BP each edged up less than 1%.
Bank of England holds, but rate hike signals loom
The Bank of England kept Bank Rate at 3.75% at its midday meeting. The more significant detail was in the guidance, most MPC members left the door open to further hikes if oil prices remain elevated, with analysts at Pantheon Macroeconomics reading the statement as pointing to two to three increases before year-end.
Markets had been pricing nearly three hikes before the decision, and the absence of urgency on timing – the committee suggested it had room to wait – nudged rate expectations down slightly after the announcement.
DCC rebuffs KKR and Energy Capital
DCC’s board unanimously rejected a takeover approach from US private equity consortium Energy Capital Partners and KKR, which had tabled a bid valuing the company at 5,800p per share. The board concluded the offer fundamentally undervalued the business and its prospects. DCC shares fell 5.7% on Thursday after jumping 17% the previous day when the approach first became public. The Irish Takeover Panel has given the consortium until June 10th to table a revised offer if it chooses to.
Whitbread and Weir drag on the index
Premier Inn owner Whitbread fell 6.4% after unveiling a five-year strategic overhaul that involves exiting its remaining 197 branded restaurants – a plan that puts around 3,800 jobs at risk and will reduce annual food sales by up to £160 million during the transition.
The group hopes the shift toward higher-margin hotel-focused dining will generate £275 million of additional pre-tax profit by 2031 and return £2 billion in free cash flow to shareholders over the same period, though the immediate outlook was grim enough to give investors pause.
Weir Group dropped sharply after its chief executive announced his departure and the company reported a fall in first-quarter orders.
Eurozone stagflation concerns add to the backdrop
Eurozone inflation rose to 3% in April from 2.6% in March, driven largely by a 10.9% annual surge in energy prices, while GDP data added to a picture of an economy under pressure from the same supply shock hitting Britain.
Analysts at Pantheon Macroeconomics said the ECB has shifted from being well-placed at the start of the year to confronting what they described as a severe stagflation shock.
The FTSE 100 outperformed its continental peers on the day, with the German DAX adding 1.2% and France’s CAC gaining just 0.5%.