Market snapshot and current outlook for FTSE 100
With US markets shut for a public holiday, the UK and others were left to their own devices. ii's head of markets issues an update and looks at prospects, particularly for domestic stocks.
2nd September 2025 08:21
by Richard Hunter from interactive investor
The lack of a lead from Wall Street, closed Monday for Labor Day, left the remainder of global markets struggling to make much headway.
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The FTSE 100 drifted lower after a mixed but largely unremarkable session in Asia overnight. British American Tobacco (LSE:BATS) slipped after a broker downgrade which read across to Imperial Brands (LSE:IMB), while the housebuilders eased for similar reasons. Berkeley Group Holdings (The) (LSE:BKG) will be the latest to report on Friday, where mortgage availability and affordability will be scrutinised, along with the strength or otherwise of its forward order book and current demand.
More positively, further gold price strength marginally lifted Fresnillo (LSE:FRES), taking the miner’s rally to almost 240% over the last 12 months, including a spike of 180% in this year alone. Some recovery in the oil price also supported the majors, whereby BP (LSE:BP.) and Shell (LSE:SHEL) are now up by 7% and 8% in the year to date.
At this very early stage, US futures are marginally weaker as trading resumes later after a long weekend. Investor focus is currently largely skewed towards the path of interest rates, which has led to some weakness in the dollar and provided another bump for the gold price. The week will culminate with the latest release of the non-farm payrolls report, with any further labour market frailty playing into the possibility of a rate cut this month.
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Current outlook
The AI euphoria of recent years, which has been a primary driver of sentiment, resulted in a 24.2% gain for the S&P 500 in 2023, followed by an additional 23.3% hike last year. This has been followed by a gain of 9.8% in the year to date, with the benchmark index close to record levels.
This has led to some stretched valuations and these concerns are not lost on US investors – or indeed the global community – who have been seeking alternative options.
The FTSE 100, on the other hand, has no such concerns.
Even though the index continues to bump against the ceiling of record highs and is up by 12.1% this year, it remains relatively cheap both on a historic and comparative basis to its peers.
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The premier index currently trades on a forward price/earnings (PE) ratio of 14, which compares to 24 for the S&P 500. While some of this considerable difference can be explained by the frothy valuations which accompany the technology sector in the US, the gap is nonetheless closing.
In turn, this implies that the current attraction of the UK as an investment destination - and the FTSE 100 in particular – continues to look compelling. The dividend gap, whereby the S&P 500 currently yields 1.2% and the FTSE 100 3.3%, is an additional bonus in terms of overall returns.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.