London close: Stocks fall on fresh US stability jitters
By Josh White
Date: Tuesday 26 Aug 2025
(Sharecast News) - London equities fell on Tuesday as political turmoil in the US unsettled global markets, with president Donald Trump's move to oust Federal Reserve governor Lisa Cook sparking investor jitters.
"A jump in US Treasury yields indicates that bond investors aren't happy about how Trump continues to meddle with the Fed and threaten its independence," said Russ Mould, investment director at AJ Bell.
The FTSE 100 declined 0.6% to close at 9,265.80 points, while the FTSE 250 shed 0.98% to 21,861.23 points.
In currency markets, sterling was last up 0.2% on the dollar to trade at $1.3482 but slipped 0.11% against the euro, changing hands at €1.1568.
Patrick Munnelly at TickMill noted that "the dollar recovered most of its declines after Federal Reserve governor Lisa Cook announced she would not resign following President Donald Trump's attempt to remove her.
"The dollar's value fell by as much as 0.3%, while gold prices increased by as much as 0.6% after Trump declared on his Truth Social account that Cook would be dismissed immediately.
"However, the dollar later regained some strength, and gold's gains were reduced after Cook affirmed her intention to remain in position."
UK shop price inflation accelerates, US durable goods orders fall
In economic news, UK shop price inflation accelerated to a 17-month high in August, adding to pressure on households and intensifying calls for government support ahead of the autumn Budget.
The British Retail Consortium said its shop price index rose 0.9% year-on-year, the sharpest increase since March 2024, as a 4.2% rise in food prices outweighed a 0.8% decline in non-food goods.
BRC chief executive Helen Dickinson said the surge in staples such as butter, eggs and chocolate reflected "high demand, tightening supply, and increased labour costs," while lower prices for clothing and books ahead of the new academic year provided "some respite for parents."
Retailers have faced £7bn in additional costs since April, she added, urging the Chancellor to avoid further tax rises and deliver meaningful business rates reform to "help retailers keep prices low for customers."
In the US, durable goods orders fell for a second month in July, declining 2.8% to $302.8bn after a 9.4% drop in June, the Census Bureau reported.
Transportation equipment orders slumped 9.7% to $101.7bn, masking a 1.1% gain in other categories.
US consumer confidence also weakened in August, with the Conference Board's headline index slipping 1.3 points to 97.4.
Inflation expectations rose to 6.2% from 5.7%, while fewer households anticipated stock price gains or higher incomes.
The expectations index fell to 74.8, below the 80 threshold typically associated with recession risk, pointing to what the Board called "growing caution among consumers."
Meanwhile, US house price inflation slowed to its weakest pace in two years in June, with the S&P Case-Shiller 20-city index rising 2.1% annually, down from 2.8% in May.
Nationally, home prices grew just 1.9%, marking the first time in years property values have lagged consumer inflation.
"American housing wealth has actually declined in inflation-adjusted terms over the past year," said Nicholas Godec of S&P Dow Jones Indices, calling the reversal "historically significant" after pandemic-era double-digit gains.
Munnelly said the focus this week would turn to "Thursday's second estimate of Q2 GDP and Friday's July PCE report.
"Headline PCE is expected to remain steady at 2.6% year-over-year, while core PCE is projected to rise by 0.3% month-over-month, pushing the annual rate to 2.9%, the highest since February and a notable jump from 2.8%.
"This data could intensify the debate between those viewing inflation as transitory and those expecting more persistent pressures."
Retailers in the red, precious metals miners shine
On London's equity markets, retailers were in the red after Deutsche Bank struck a more cautious tone on the sector, downgrading several stocks on concerns over the UK consumer outlook.
Primark owner Associated British Foods fell 3.98% to 2,222p after the bank cut its rating to 'sell' from 'hold' and lowered its price target to 2,130p from 2,220p.
Wickes Group dropped 8.62% to 201.5p after also being downgraded to 'sell', with its price target cut to 195p from 205p.
B&Q parent Kingfisher slid 4.34% to 269p after Deutsche Bank moved it to 'hold' from 'buy' and trimmed its target to 280p from 320p.
Elsewhere, British American Tobacco eased 1.9% to 4,233p as the company announced the immediate departure of its chief financial officer, Soraya Benchikh.
Mould said "the immediate exit of a finance chief at a company raises alarm bells and the reaction to this development at British American Tobacco certainly betrays some nervousness among investors."
On the upside, Bunzl gained 5.12% to 2,506p.
"Investors have now reacted with relief to a first-half results announcement which is reassuringly prosaic," said Mould, noting that profits were lower as guided but the company had resumed its buyback, suggesting "the ship has been steadied thanks to divisional leadership changes, cost savings and an increased focus on higher margin own-brand products."
Precious metals miners also advanced as gold prices hit a two-week high following Trump's dismissal of Fed governor Cook.
"Traders have begun looking for alternatives to the dollar and Treasuries, and any perceived loss of Fed independence might hasten this trend," Munnelly said.
Fresnillo rose 3.08%, while Hochschild Mining added 1.93%, as investors weighed the prospect of easier US monetary policy and dollar weakness.
Reporting by Josh White for Sharecast.com.
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