FTSE 100 drifts lower; WPP shines on AI deal with Nvidia

The stock market in the United Kingdom traded neutral on Tuesday, as investors returned from a long weekend to absorb an agreement to lift the United States’ debt ceiling as well as new inflation fears.

At 08:15 GMT, the benchmark FTSE 100 index was down 0.2%, the mid-cap FTSE 250 was up 0.4%, and the combined FTSE 350 was nearly unchanged.

Over the weekend, US President Joe Biden and senior congressional Republican Kevin McCarthy announced an agreement to postpone the country’s $31.4 trillion debt ceiling until 2025 in return for a two-year spending restriction.

Concerns have grown that failure to reach an agreement would result in the United States defaulting on its debt commitments, which would have had serious global economic repercussions.

However, the agreement still needs to be approved by both chambers of Congress in a bitterly divided Congress, and it is expected to meet opposition from the extreme wings of both parties.

Back in the United Kingdom, the British Retail Consortium said that shop price inflation increased this month to its highest level since industry records began in 2005, with prices in supermarkets and retail chains jumping 9.0% year on year in May, following an 8.8% increase in April.

This is expected to retain pressure on the Bank of England to keep raising interest rates, with UK inflation at 8.7%, tied with Italy, among the G-7 industrialised countries.

According to Goldman Sachs, the Bank of England will not achieve its 2% inflation target until the end of 2025, owing to rising food costs and wage rises.

In corporate news, WPP shares jumped 2% as the advertising conglomerate revealed intentions to collaborate with chipmaker Nvidia to employ generative artificial intelligence in advertising.

Bunzl shares declined 0.7% after the packaging and distribution company announced the acquisition of safety firms in Brazil and Spain, bringing the total number of acquisitions since 2004 to 200.