Market Commentary: 29 September 2026

Market Commentary: 29 September 2026

29 September 2026

Market news

UK economic activity data has softened as the Budget on 28 October draws closer. The flash composite Purchasing Managers' Index ("PMI") fell to 51.7 in September from 52.5 on weaker services growth, though manufacturing was more resilient at 52 and input cost inflation accelerated on higher fuel costs. The Confederation of British Industry ("CBI") retail sales balance fell to minus 55 from minus 48, orders placed with suppliers declining at the fastest rate since the survey began in 1983. Public sector net borrowing was above expectations at £18.27 billion in August, from £15.35 billion a year earlier, and the 10-year gilt yield rose eight basis points to 5.37%.

Energy supply risk continued to set the tone, Houthi attacks on Riyadh and the Saudi oil terminal at Yanbu holding Brent Crude firmly above $100 a barrel, closing on Friday at $106.21. UK shares held up well despite higher oil prices and weaker economic data, with both the FTSE 100 and FTSE 250 ending the week in positive territory. Company results beat the backdrop in places: safety products manufacturer Halma lifted its adjusted earnings before interest and tax ("EBIT") margin guidance for the year to March 2027 to between 23.5% and 24%, and retailer Kingfisher raised annual profit guidance after adjusted first half ("H1") profit rose 9.9% to £404 million. House builder Vistry Group swung to a £661.3 million pretax loss, mostly driven by a £475 million goodwill impairment.

Across the Atlantic, a strengthening economy pushed borrowing costs to their highest in decades without unsettling equities. The flash composite PMI rose to 58.4 in September from 58, a 62-month-high, with services at 58.7, manufacturing at 57 and input costs at their fastest since October 2022. Against hawkish comments from several Federal Reserve ("Fed") officials, a five-year Treasury auction cleared at 5.033%, the highest since 2006, and 30-year yields passed 5.5%, last seen in 2004. The 10-year yield rose 16 basis points to 5.16%. Equity markets still advanced, with gains concentrated in information technology and communication services on strong uptake of Meta Platforms' consumer artificial intelligence ("AI") agent, while rate-sensitive utilities and energy lagged.

European markets weighed improving growth against further tightening. The eurozone composite PMI rose to 53.1 in September from 52, ahead of expectations, with French business activity returning to growth for the first time in 10 months with input costs and selling prices at a four-month-high. Germany's Business Climate Index reached 89.9 from 88.8, a fifth consecutive increase and its highest since May 2023, though the consumer climate reading for October fell to minus 30.6. Berlin approved a cut of around 14 euro cents per litre in fuel duty from 1 October, a fiscal answer to the energy shock. The EuroSTOXX 50 rose and the 10-year German Bund (equivalent of a UK gilt) yield added eight basis points to 3.6%.

Japanese equities gained in only two trading sessions, markets having closed Monday to Wednesday for national holidays, catching up with earlier strength in US technology shares. The 10-year Japanese government bond yield rose to 3.07% from 2.97%, tracking the Treasury sell off. The yen moved beyond 158 to the dollar before firming on Friday, with investors alert to intervention after authorities conducted a rate check on 18 September. The US and China extended their trade truce by two months to 10 January 2027.

Stock focus

Smiths Group, the industrial engineering company, surged 11% over the week to stand at £28.16 per share after delivering forecast-beating annual earnings and raising its growth outlook. Operating profits reached £399 million following the £3.3 billion sale of its Detection and Interconnect divisions. Investor sentiment was boosted by management's confident forecast of roughly 4% organic growth for the coming year, backed by a robust order book. Shareholders largely looked past ongoing Middle East war disruptions, taking comfort in the group's successful shift toward a leaner, higher-margin business model.

Kingfisher, the international home improvement retailer behind the brands B&Q and Screwfix, rose 8.81% over the week to stand at 328.4 pence per share following a full year profit upgrade. Adjusted pre-tax profit grew 9.9% to £404 million in the first half, supported by strong trade demand, online sales and market-share gains at Screwfix. Market mood was lifted as management raised full-year profit expectations to between £595 million and £635 million while continuing its £300 million share buyback. Investors responded enthusiastically to structural cost savings and strong international growth in Poland and Iberia, which helped offset wider inflation headwinds.

Auto Trader, the UK's largest digital vehicle marketplace, dropped 6.51% over the week to stand at 456.4 pence per share amid sector-wide selling in online classifieds. Despite solid half-year results showing higher revenue and net income, market sentiment was weighed down by investor fears that AI-driven search tools could erode portal dominance. While the company continues to generate strong cash flow, maintain high margins and return cash via buybacks, shareholders remain cautious. Market mood stayed closely tied to broader sector anxiety over potential AI disruption rather than the platform's solid underlying operating progress.

Market Commentary prepared by Walker Crips Investment Management Limited.

Important information

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