Key events

13m agoBarratt plans £400m investor return after home completions reach upper forecast range
44m agoEuropean equities decline while Brent crude advances 1.5%
51m agoASML lifts projections amid AI-driven chip equipment demand
2h agoIntroduction: China posts one of its slowest growth rates on record; Thames Water secures cash to last until year end

Barratt plans £400m investor return after home completions reach upper forecast range

Britain's top housebuilder Barratt Redrow aims to reward shareholders with a £400m distribution after reporting completions at the high end of expectations.

The firm completed 17,667 homes in the year ending 28 June, a figure slightly above analyst estimates and including 3,774 affordable units. It targets 17,700 to 18,200 homes over the next 12 months.

To draw buyers, Barratt has increased incentives since last autumn and expanded part-exchange options, which it described as an effective sales approach.

The average selling price rose to £352,000 from £344,200 the prior year.

Barratt anticipates little house price growth alongside 3% to 4% build cost inflation this year, driven by higher energy costs linked to the Iran conflict and reduced sector activity.

Forward sales eased to 9,728 homes from 9,835 a year earlier.

Nevertheless, the company will return £400m to investors primarily via a share buyback plus a £14m dividend. The announcement lifted shares nearly 2%, ranking among the strongest FTSE 100 performers today.

Outgoing chief executive David Thomas stated:

Barratt Redrow has delivered a solid performance in a challenging market, completing 17,667 homes and generating adjusted profit before tax in line with market expectations.
Despite continued improvements in mortgage availability this year, consumer sentiment remained cautious particularly after the start of the conflict in the Middle East, with heightened macro uncertainty, and the corresponding risks around inflation, driving mortgage rates higher, continuing to pressure affordability.

He noted Redrow integration is progressing well with £73m of the planned £100m cost savings already realized, and further efficiencies are under review. Barratt purchased the smaller rival two years ago in a £2.5bn transaction.

Thomas will step down on 21 September in favor of new CEO Dean Banks, who has led infrastructure firm Ventia Pty since 2021 and previously held roles at Balfour Beatty and De La Rue.

Barratt is one of seven major UK housebuilders facing a £4.5bn class action alleging collusion to raise house prices.

European equities decline while Brent crude advances 1.5%

European stock markets are mostly lower.

The FTSE 100 in London dropped 82 points, or 0.78%, to 10,446. Germany's Dax fell 1%, France's CAC slipped 0.3%, Italy's MiB declined 0.7% and Spain's Ibex lost nearly 1%.

Brent crude is climbing again, up 1.5% to $86 a barrel, as Middle East tensions intensify. The US has targeted Iran for a fourth straight day while Iran struck US bases in the Gulf.

Its deputy foreign minister said Donald Trump's decision to reinstate the US blockade on Iranian shipping has, in a way, dismantled the Islamabad memorandum.

The pound edged 0.1% higher versus the US dollar at $1.3406.

The dollar has weakened since the softer-than-expected US inflation figure of 3.5% for June released on Tuesday, leading traders to reduce rate hike projections.

Chris Turner, head of global markets at ING, said:

The market was building a conviction that the Fed was going to hike in September and it has certainly injected a bit of doubt into that now.

ASML lifts projections amid AI-driven chip equipment demand

Dutch technology leader ASML, which produces chip-making equipment for the tech sector, has raised its sales outlook for the second time this year on robust AI system demand and posted stronger second-quarter earnings.

Its share price rose 5.7% following the update.

ASML plays a vital role in the global economy and serves as a key indicator for technology, since semiconductors made with its systems power everything from smartphones to missiles.

Investors monitored the results after multiple sell-offs in global tech shares over concerns an AI bubble might burst.

Yet chief executive Christophe Fouquet said AI continues to support the business.

Ongoing AI-related investments and continued progress in AI technologies are driving demand for advanced logic and memory chips, further strengthening the semiconductor industry's growth outlook.
Our order intake remained extremely strong in the first half of the year.

Europe's largest company by market value now forecasts €43bn to €45bn in net sales for the year, up from the prior €36bn to €40bn range.

Second-quarter sales increased to €9.3bn from €7.7bn a year earlier. Net profits also exceeded expectations, rising to €2.9bn from €2.3bn.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, reviewed the figures.

ASML has delivered another statement quarter, with sales and profitability both ahead of guidance and the full-year outlook lifted by much more than the market expected. The biggest surprise came from customers upgrading and servicing equipment already on factory floors, a sign that chipmakers are pushing existing capacity while preparing for the next wave of investment. But this is more than a short-term scramble. AI demand is pulling investment forward across both advanced computing and memory chips, giving ASML clearer sight of customer demand well beyond this year.
The story has now shifted from whether demand will arrive to whether ASML can expand production fast enough to meet it. Management is responding with ambitious capacity plans, directly addressing one of the main concerns that has been rumbling in the background.
That supports our view that ASML remains one of the clearest ways to gain exposure to the AI infrastructure build-out, thanks to technology that the world's leading chipmakers simply cannot replace. ASML now needs to convert a powerful order pipeline into system deliveries, revenue and profit - scaling production without losing control of costs.

Introduction: China posts one of its slowest growth rates on record; Thames Water secures cash to last until year end

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

China grew 4.3% in the quarter to 30 June, one of the slowest rates on record, as weak domestic demand outweighed a surge in exports.

Growth slowed from the first quarter rate of 5%, marking the lowest pace in three and a half years. The result missed economist forecasts and fell short of Beijing's 4.5% to 5% target range.

Thames Water said this morning that it has enough funding to survive until the end of this year. It is working on a rescue recapitalisation plan with creditors, regulators and the government to avoid temporary nationalisation.

Britain's largest water company holds £515m of cash in the bank, according to its annual report.

The company, which serves 16 million customers in London and southern England, has become a symbol of failure in Britain's privatised water sector, polluting rivers and the sea with sewage due to ageing infrastructure, and struggling under a massive debt pile. It said its debts grew by £1.7m from last year, to £18.5bn.

In recent weeks, the environment secretary, Emma Reynolds, objected to a £10bn rescue proposal for the company put forward by 100 institutional investors to the industry regulator Ofwat, saying it would place an undue burden on consumers.

Andy Burnham, who is expected to become the UK's new prime minister on Monday, has said he believes public ownership is the best option for Thames Water. The government was already looking at taking Thames Water into its Special Administration Regime, a form of temporary public ownership.

However, Thames said its performance is improving. Sewage pollution fell 18% in the 12 months to the end of March, and its underlying profit after tax jumped to £203.9m, from £12.6m last year.

Chief executive Chris Weston said:

While operationally the business is improving, we are also working with our creditors, regulators and government to complete our recapitalisation.

In financial markets, oil prices have increased modestly, after the US ditched a plan to charge a 20% fee on cargo transiting through the strait of Hormuz. But Donald Trump ratcheted up the rhetoric, threatening to expand US strikes on Iran next week to target power plants and bridges if Tehran does not agree to a deal.

Brent crude rose 0.7% to $85.3 a barrel, after climbing above $86 a barrel on Tuesday amid escalating tensions in the Middle East.

Asian stock markets mostly rose and government bonds steadied, after a bigger-than-expected cooling in US inflation on Tuesday prompted markets to scale back expectations for interest rate hikes.

Japan's Nikkei rose 1.5% and Hong Kong's Hang Seng climbed 1.4%, while South Korea's Kospi, which took a hammering earlier in the week, bounced back 6.2%.

Bond yields and the dollar fell amid relief over the inflation reading. The pound rose 0.45% against the dollar and the euro was above $1.14 while two-year Treasury bonds (which are particularly sensitive to rate expectations) fell 9 basis points to 4.2% from Tuesday's 17-month high of nearly 4.3%.

However, US Federal Reserve chair Kevin Warsh told Congress on Tuesday that one data point was not enough to declare victory over inflation.

Also contributing to optimism, Netherlands-based ASML, Europe's most valuable company and the world's biggest supplier of chip-making equipment, has beaten revenue forecasts.

The Agenda

10am BST: Eurozone industrial production for May
1.30pm BST: US producer prices for June
2.45pm BST: Bank of Canada interest rate decision
3pm BST: US Federal Reserve chair Kevin Warsh Congress testimony
UK Treasury annual report and accounts TBC