Key events

1h agoUnilever indicates possible price increases later this year
2h agoBarclays traders and investment bankers drive profit higher by 17%
2h agoIntroduction: AI stock decline intensifies with chip shares falling amid market pullback

European stock markets show a mixed start this morning, with the Stoxx Europe 600 rising 0.1% while the UK blue-chip FTSE 100 index slips 0.1%.

Oil prices continue to ease today, as the international benchmark Brent crude falls 2.7% to $85.95 a barrel.

Unilever indicates possible price increases later this year

In other developments, consumer goods firm Unilever has cautioned that its prices may increase later this year.

The company, known for brands such as Dove soap and Hellmann mayonnaise, stated it anticipates underlying price growth to pick up in the second half as commodity-driven pricing continues to take effect in the market.

This follows the FTSE 100 group reporting better-than-expected second-quarter underlying sales growth of 5.8%, supported by higher volumes and prices.

Chief executive Fernando Fernandez, appointed last year to speed up the turnaround strategy, noted:

We have delivered a strong volume-led performance in the first half, with a significant step-up in the second quarter, the best volume quarter at Unilever in over a decade.
The macroeconomic environment remains uncertain, but our consistency, discipline and strong first half performance give us confidence that we are well positioned to deliver our upgraded full year outlook.

The company expects underlying sales growth for 2026 to fall within its multi-year target range of 4%-6%, an improvement from its prior forecast at the lower end of that range.

Its shares have risen 5% this morning.

Matt Britzman, senior equity analyst at broker Hargreaves Lansdown, notes that Barclays investment bank carried much of the load this quarter.

Costs were higher than expected, but income grew faster, and the combination of a larger dividend and 1bn share buyback adds further weight to an encouraging set of numbers.
The outlook has also improved, with Barclays raising its full-year income target and expecting more benefit from its core banking activities. UK lending continues to grow, and the investment bank is producing much healthier returns, although it still has more to prove against the scale of its US rivals. For now, the strategy is moving in the right direction, with stronger profits supporting investment in the business as well as increased cash returns to investors.

Barclays shareholders may celebrate when the market opens soon, yet the TUC argues that the profit rise suggests the government should tax banks more heavily.

The union body proposes that revenue from a higher bank tax could fund a social energy tariff.

TUC general secretary Paul Nowak states:

Big banks like Barclays are raking it in while working people and local businesses are struggling. High interest rates have been a boon for banks but have meant mortgage misery and higher bills for the rest of us.
Andy Burnham has rightly pledged to prioritise tackling the cost-of-living crisis. With the war in Iran rumbling on, energy prices are only going to rise, and households will need more support in the months ahead.
This is not a hard choice. Barclays bonanza profits show that banks can easily afford to pay more tax. This is a chance for the new Prime Minister and Chancellor to show whose side they are on. It is time to increase the bank surcharge and tax banks to bring down energy bills.

Barclays traders and investment bankers drive profit higher by 17%

On the corporate front in the UK this morning, Barclays has reported a 17% rise in profit for the first half of the year, aided by strong results from its equity traders and investment bankers.

The bank said its pre-tax profit reached 6.1bn, up from 5.2bn at the same point a year earlier and above analyst forecasts of 5.9bn.

Equities traders at the bank generated 1.26bn, above estimates and up 45% compared with last year. The fixed-income business was less impressive, reporting income of 1.47bn, around the same level as a year ago.

Investment bankers also performed better than expected, with banking fees and underwriting revenue of 747m, up 32%.

However, the bank noted its credit impairment charges for bad loans rose to 1.4bn for the half-year period, from 1.1 billion the year before.

The rout in AI stocks also followed a report by the Information that China has begun mass production of homegrown deep ultraviolet, or DUV, chipmaking tools.

Jing Jie Yu, an equity analyst at Morningstar, said:

We believe the market was likely spooked by the progress of China chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders.
That said, we believe the sell-off today is largely a knee-jerk reaction and overdone.

Introduction: AI stock decline intensifies with chip shares falling amid market pullback

Stock markets are tumbling in Asia, as an AI sell-off pushes investors to dump some of the biggest chip stocks in the industry.

The South Korean Kospi dropped more than 10% on Monday, with trading halted at one point, and Japan Nikkei fell more than 4%.

Shares in the chip companies SK Hynix and Samsung Electronics both fell by more than 10%.

It follows a rough day of trading in the US too, with SK US-listed shares dropping 7% on Monday, and chip designer Nvidia dropping 5%, giving Apple back its top spot as the world biggest listed company.

Investors are growing increasingly fearful of the huge amount of borrowing among AI companies, and a report from the FT last night highlighted that prices for credit default swaps, a tool to bet against corporate debt, tied to the likes of Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia have risen to record highs in recent days.

Jim Reid, of Deutsche Bank, says markets are caught between a new sell-off in chipmakers and the positive news that the US-Iran pause from over the weekend would continue as both sides negotiate in talks.

This meant that the S&P 500 (+0.02%) and Nasdaq (-0.16%) were little changed yesterday after an initial rally, whilst the Philly Semi Stock Exchange Index (-2.23%) fell further. The equity performance also was not helped by new highs in real yields, though nominal 10yr Treasury yields (-2.8bps) came down as Brent crude fell -8.70% yesterday, in its largest decline since April. It is an additional -2.0% lower this morning, trading at $86.59/bbl, after being at $101 on Friday morning. S&P 500 (-0.22%) and Nasdaq (-0.74%) futures are lower this morning.

The AI sell-off also comes even after a flying market debut for the Chinese chip company CXMT, which joined Shanghai stock exchange on Monday and surged by more than 400% in its first day of trading.

The agenda

7am BST: Barclays half year results, Unilever half year results, GSK second quarter earnings, Games Workshop full year results
Today: Tate and Lyle holds a general meeting in London for shareholders to vote on proposed acquisition by Ingredion