Dear reader,
Everyone thought it was Shabana Mahmood for the Treasury. The FT’s source had her “nailed down” for the job. The City had her pencilled in. A sterling market rallied to a one-year high against the euro on the strength of it. This desk told you the same last week, in as many words. How wrong we all were. Andy Burnham walked into Downing Street and handed the red box to John Healey, the former defence secretary, a man who resigned from Starmer’s cabinet earlier this year over military funding and sat on nobody’s shortlist [1]. Not Mahmood, not Miliband, the two names the whole market had penned in. Healey.
So what does Healey actually mean. Less than a Miliband pick would have, and in a different direction. He is read as a pragmatist rather than an ideologue, a safe pair of hands in the shorthand of more than one City analyst, which is why the pound held most of the ground it had taken on the Mahmood story rather than giving it back. The twist is the reason he resigned in the first place. Healey walked out over the last government’s refusal to commit 3% of national income to defence by 2030, so his arrival at the Treasury reads as a green light for higher military spending, and that is a fiscal signal as much as a strategic one. A chancellor who wants to spend more on defence has to find it somewhere, and the gilt market will eventually ask where. For now it is content, helped by a first policy that went the other way on tax: from 1 October, VAT on domestic energy bills falls from 5% to zero, worth roughly £45 a year per household, funded by scrapping the old Digital ID scheme.
The rest of the cabinet carries more market weight than a reshuffle usually does, because one appointment lands squarely on a sector. Angela Rayner is back at housing, returning to the Ministry of Housing, Communities and Local Government less than a year after she resigned over an underpaid stamp-duty bill, a matter HMRC cleared her of in May [2]. For equity investors the politics of the comeback is beside the point. The policy is not. In her first spell Rayner was the driving force behind Labour’s planning overhaul, restoring mandatory local housing targets and pushing the release of lower-quality grey-belt land for development, and Matthew Pennycook stays on as housing minister to keep the thread unbroken. Her return signals that the building agenda accelerates rather than drifts, and it arrives just as firmer house-price data has already been reviving the domestic-recovery trade. The read-through runs first to the housebuilders, Vistry (LON:VTY) and Persimmon (LON:PSN) among them, and one rung down to the building-materials suppliers such as Ibstock (LON:IBST). A chancellor who himself held the housing brief between 2007 and 2010 only sharpens the point. If sterling stays firm and a softer inflation path nudges the Bank of England toward easing later in the year, the rate-sensitive domestics are the corner where a pro-building government and a friendlier rate cycle overlap.
The sector that repriced hardest, though, was defence, and it had two engines this week rather than one. Healey’s appointment was the domestic engine. The other came from the Gulf.
The bigger picture: two shocks the index gains hide
Both London indices held up reasonably well on the week, which flatters a tape that was anything but calm underneath. Two forces drove almost everything that moved.
The first was a second leg down in the AI trade, and this was not last week’s story on repeat. Fresh doubts hit the most crowded corner of the global market. OpenAI’s Sam Altman spoke openly about a possible bubble, an MIT study landed showing how little most companies are actually earning back on their AI spending, and the US government was reported to be weighing an equity stake in a troubled Intel. None of that is an earnings collapse. It is a valuation wobble in the trade everyone is leaning on, which is often how the sharpest moves start. The Nasdaq lost around 2% on the week and had its worst single session in over a month on Thursday, Intel fell close to 8% into Friday, and the semiconductor index now sits about 20% below its June high even after a year that still leaves it up strongly [3]. For London the read-through is the one that has been building all month. The tech-light FTSE 100 keeps outperforming a falling Nasdaq for the same reason it looked dull through the entire AI rally, and the UK proxies most exposed to the derating, the technology trusts and the compute-hardware names that led the falls a fortnight ago, were quieter this week as domestic catalysts took the wheel. The selling has not gone away. It has moved down a gear in London while the corporate action moved up one. Next week’s mega-cap reports from Microsoft, Meta and Apple are the real test of whether the AI capex story holds, and the guidance will matter far more than the printed numbers.
The second force was oil, and it broke rather than drifted. Two weeks ago Brent slid below $76 on hopes of a US-Iran settlement. This week that hope collapsed. US forces resumed strikes on Iran over the disputed shipping routes, drones hit a northern Iraqi city housing US personnel, the Houthis declared a blockade on Saudi shipping, and Brent topped $100 a barrel intraday before easing back below it on Friday [4]. That is the highest in months and the clearest sign yet that June’s understanding is dead. The market implications run in three directions. The obvious one is the energy names, lifted directly by the supply-risk premium snapping back into the price. The second is defence, which now has the Gulf as well as Healey behind it, turning what could have been a one-week political pop into something with a longer runway. The third is the one investors are underpricing: a Brent price near triple digits feeds straight into headline inflation, which complicates the Bank of England’s path and cuts, at the margin, against the very domestic-recovery trade the Rayner appointment supports. The same week handed the rate-sensitive names a reason to hope and a reason to worry. On the energy majors themselves the split is unchanged. Hold them for the income and the dividend case is intact. Hold them for a price recovery and you are once again a hostage to a conflict that has fooled the market in both directions all year, and this week it moved against the diplomats.
Put the two together and the shape of the week is clear. Money left global technology and chased corporate catalysts and hard assets, rewarding exactly the unglamorous, cash-generative, dollar-and-commodity-facing businesses the FTSE is built on.
The movers
A scan of the week, with a verdict on each. Signal means a real change in the story. Noise means a move to look past.
Risers, FTSE 250
Mitie (LON:MTO), +38.68% to 209.40p. Agreed a £3.1bn cash takeover by US-backed rival OCS at 221.6p a share. Signal, and the idea of the week below.
PageGroup (LON:PAGE), +18.75% to 180.50p. Q2 gross profit beat consensus on cost cuts and firmer trading in the Americas, guidance held, the UK jobs market called tough but stable. Signal. Recruitment is a leading read on the economy, so this one carries more than its size.
Ocado (LON:OCDO), +13.14% to 186.90p. A bounce off a 13-year low after the stock shed close to 28% on half-year results that showed worsening cash flow and no new US partners. Noise. The rebound is oversold mechanics and short covering, not a change in the story.
Energean (LON:ENOG), +10.47% to 828.00p, and Harbour Energy (LON:HBR), +9.77% to 256.20p. The clearest expression of the Brent move above $100, with persistent takeover chatter around Energean adding a second leg. Macro trade, so read the move as a function of the oil price and the conflict behind it.
Fallers, FTSE 100
Flutter Entertainment (LON:FLTR), -9.76% to 7,598p. Pressure from prediction markets such as Kalshi eating into sportsbook volumes, ahead of the group’s LSE delisting on 3 August. Signal, and a structural question the market has not finished asking. Michael Burry has taken the other side with a disclosed long [6].
easyJet (LON:EZJ), -8.01% to 618p. Covered in the follow-up below. The short version: a widening discount to a live bid.
Centrica (LON:CNA), -7.49% to 163p. Half-year results missed on revenue, earnings and cash as transformation spending stepped up, EBITDA down 18%, though the interim dividend rose 9% [7]. Signal. The pivot to steadier infrastructure earnings is costing more up front than the market wanted to pay.
Rentokil Initial (LON:RTO), -5.33% to 426p. No fresh catalyst. Looks like give-back after an early-July Goldman upgrade, with the slow US pest-control business still overhanging. Mostly noise.
Fallers, FTSE 250
Capital Gearing Trust (LON:CGT), a headline -89.99% that is nothing of the sort. The trust ran a 10-for-1 share subdivision, so the price divided while your holding did not. Noise, and this week’s nothing-to-see-here.
Oxford Biomedica (LON:OXB), -11.61% to 571p. A pullback after a sharp early-July run, with the earlier failed-sale disappointment still in the background. Momentum unwind more than a fresh problem.
Watches of Switzerland (LON:WOSG), -9.10% to 709p. Full-year results confirmed the US has overtaken the UK as its largest market, but margins felt the drag of US tariffs and high gold prices, and Jefferies pulled its rating as the re-rating ran its course. Signal, though reported take-private talks sit underneath as a floor.
Me Group International (LON:MEGP), -7.97% to 106.20p. A round trip. This was a riser in last week’s mid-cap top five at exactly this price, and it has handed the gain straight back. The structural worry has not changed: photobooth demand fades as document selfies take over, with laundry the offset, and the yield is now above 8%.
Vietnam Enterprise Investments (LON:VEIL), -5.99% to 690p. A country fund tracking a soft Vietnamese market and a wider discount, with no company-level news behind it. Macro, so read it as regional sentiment.
Idea of the week: the take-private wave, part three
Regular readers will recognise this theme, because it is the third week running it has led the letter. In June it was America buying Britain, with Prologis chasing SEGRO and Castlelake circling easyJet. Last week it was the world buying Britain, with Switzerland’s ABB landing Rotork and France’s Xavier Niel taking a fifth of Vodafone. This week it produced the biggest domestic-listed target of the run.
Mitie (LON:MTO), one of the UK’s largest facilities-management firms, agreed a £3.1bn cash takeover by US-backed rival OCS. The offer of 221.6p a share, 218.5p in cash plus a 3.1p dividend, lands at roughly a 47% premium to the night before, and the shares jumped almost 39% [5].
Two things lift this above a one-off. The first is operational. Mitie went into the bid growing revenue at 10% a year, well ahead of a facilities-management market that typically manages 2% to 3%, with management pointing at contract wins and AI-driven services as the driver. This is not a distressed business being rescued, it is a healthy one a buyer decided was too cheap to leave listed. Panmure Liberum sees the deal completing with only a small chance of a counter-bid, and Deutsche Bank moved to the sidelines with a target parked just below the offer, which tells you how little further upside the market expects beyond 221.6p.
The second is that the queue keeps lengthening. In the space of a month the London market has watched SEGRO, easyJet, Rotork, Vodafone and now Mitie draw overseas capital, whether as full bids or strategic stakes. The common thread is unchanged. A cash-generative business, a UK listing, and a valuation that global buyers read as a structural discount. Whether or not any single situation completes matters less than the direction of travel, and for holders of quality UK mid-caps the gap between public price and private value is increasingly being closed by acquirers rather than by the market itself.
Idea of the week: the take-private wave, part three
The take-private wave, part three. In June it was America buying Britain, Prologis chasing SEGRO and Castlelake circling easyJet. Last week the world joined in, with Switzerland’s ABB landing Rotork and France’s Xavier Niel taking a fifth of Vodafone. This week gave us the biggest domestic target yet.
Mitie (LON:MTO) agreed a £3.1bn cash takeover by US-backed rival OCS at 221.6p a share, a 47% premium, and the shares jumped almost 39% [5]. What lifts it above a one-off is that it is no rescue. Mitie went in growing revenue at 10% a year, well ahead of a sector that manages 2% to 3%, on contract wins and AI-driven services. A healthy business a buyer decided was too cheap to leave listed. Panmure Liberum sees it completing with little chance of a counter-bid, and Deutsche Bank moved to the sidelines with a target just below the offer.
The point is the queue. In a month the market has watched SEGRO, easyJet, Rotork, Vodafone and now Mitie draw overseas capital. Same profile each time: cash-generative, UK-listed, priced at a discount global buyers won’t ignore. For holders of quality mid-caps, the gap between public price and private value is being closed by acquirers rather than by the market.
On the watchlist
One name sits right where the week’s two themes cross. Labour’s pledge of 1.5 million homes still stands, but delivery is running well short of the 300,000 a year England needs, and Rayner’s return, with mandatory local targets and grey-belt release, is aimed straight at that gap. The will to build is there. Whether the economy allows it is the open question, and Persimmon (LON:PSN) is where that question plays out. It is a volume leader weighted to the affordable end the government most wants supplied, with an in-house supply chain that guards margins, guiding to 12,000 to 12,500 completions this year. But it has already warned that Iran-driven energy costs are feeding build-cost inflation into 2027, and the same oil move threatens the rate cuts its buyers need. The barrel of Brent that lifted this week’s energy names works against Persimmon twice, on costs and on demand. That is the tension to watch.
Follow-up: last week’s open threads
Two things from last week’s letter have now resolved, and one of them resolved against the call.
The Chancellor. I laid out the Mahmood case in full and the market had priced it, so the Healey appointment caught this desk and most of the City off guard. The honest read is that the specific name was wrong but the framing held: the market wanted a pragmatist over an ideologue, and in Healey it broadly got one, which is why the sterling strength built on the Mahmood story did not unwind. What the consensus missed is the defence angle now stitched into the Treasury, and that is the thread to carry forward rather than the one we closed.
easyJet completes a three-act arc. Two weeks ago it was the Castlelake letter, last week it firmed toward a mooted bid level around 715p, and this week it fell 8% to 618p, well below any offer discussed. That widening discount is the tell. The market is not doubting that suitors want the airline, with Castlelake lifted to £7.15 and Apollo now circling at an 81% premium, and a firm-offer deadline of 3 August. It is doubting the deal can clear the EU rule capping non-European ownership of an airline at 49.9%. When a stock trades this far under a live bid, the gap is the market pricing completion risk, and that risk now rests squarely on a regulatory structure nobody has yet shown can be made to work.
Who reported this week
It was a heavy week for results, and several spoke straight to the themes above.
RELX (LON:REL) was the standout. The analytics group grew first-half underlying revenue 7% and adjusted operating profit 9%, lifted its margin to 35.5% and raised the dividend 7%, with the Legal arm and its AI assistant Protégé leading at 10%. It matters beyond its own numbers. RELX is the London name most often tagged as AI-exposed, and the shares had been marked down on fears that a third-party legal AI tool could hollow out that Legal franchise. This week it showed AI arriving instead as paid product and fatter margin, in the same days US investors spent fearing their own AI spend will not pay off. It is this week’s counterexample to the selloff, and a cleaner answer than the market handed LSEG a month ago.
On housing the read was more sober. Howden Joinery (LON:HWDN) grew first-half sales 3.3% to £1.03bn and underlying operating profit 5.5%, held its gross margin above 62% and completed the £390m DIY Kitchens deal just after the period end, yet still calls the UK kitchen market broadly flat for the year. Set against the housebuilder optimism, the counter that supplies local builders is holding rather than accelerating. Morgan Sindall (LON:MGNS) was brighter, with record first-half figures led by its fit-out arm, a reminder the built-environment story runs through public and commercial work as much as through new homes.
Centrica (LON:CNA) sits in the fallers above, punished for the transformation spend the market would not fund, first-half EBITDA down 18% with cash generation the pressure point. Jupiter (LON:JUP) came in on the other side of the ledger, the asset gatherer more used to outflows reporting positive net flows of £0.7bn, assets up 36% to £73.7bn and underlying pre-tax profit up 67%, the last flattered by the CCLA acquisition but underpinned by real retail demand, with the dividend lifted 76%. Mulberry (LON:MUL) reported full-year numbers into a soft luxury tape, the demand backdrop that also hangs over Watches of Switzerland, though its own gross margin moved the other way, to 72% from 67% on full-price discipline as the loss narrowed sharply.
Looking to next week, Primary Health Properties (LON:PHP), the healthcare REIT and NHS landlord these pages have covered before, reports first-half figures on Thursday, with its post-Assura deleveraging the thing to track against a yield north of 7%.
Thanks for reading,
Ollz
This article is for informational and educational purposes only and does not constitute financial advice. The author may hold positions in securities mentioned. Always do your own research and seek independent financial advice before making any investment decision. Capital is at risk.
Sources
[1] City AM, https://www.cityam.com/john-healey-becomes-chancellor-as-andy-burnham-names-top-cabinet-appointments/
[2] Property Week, https://www.propertyweek.com/news/angela-rayner-returns-as-housing-secretary-in-burnhams-cabinet
[3] Yahoo Finance, https://finance.yahoo.com/markets/live/stock-market-today-friday-july-24-dow-sp-500-nasdaq-081854465.html
[4] Britannica, https://www.britannica.com/event/2026-Iran-war
[5] Reuters (via AOL), https://www.aol.com/articles/ocs-group-buy-mitie-4-061958000.html
[7] Investing.com, https://www.investing.com/news/company-news/centrica-h1-2026-slides-transformation-costs-weigh-on-earnings-93CH-4809552
Small point but PHP did not report this week. It will do so next week.