Must read: Swiss stocks hit by tariffs, oil, Bank of England, BP

GLOBAL MARKETS 

The FTSE 100 is trading just above the flatline with the DAX and CAC 40 also in the green. Lloyds Banking Group (LSE:LLOY) is at the top of the FTSE 100 after a Supreme Court ruling over car finance in favour of lenders. Close Brothers Group (LSE:CBG) is at the top of the FTSE 250, boosting its stock market value by almost a quarter. Swiss stocks are under pressure after the US imposed tariffs of 39%, sending the SMI down by around 1.5%.

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After US markets closed sharply lower on Friday with the Nasdaq shedding over 2%, US futures are pointing to a higher open as they look to regain some ground after Friday’s jobs data, which massively disappointed market expectations. 

Oil is in focus after OPEC+ announced plans to raise output by 547k bpd in September as it continues with its plans to boost production and increase market share. 

Tariffs will continue to be a dominant market force this week. Plus after the slew of banks and tech stocks reporting, US earnings season continues with reports from Pfizer Inc (NYSE:PFE), Caterpillar Inc (NYSE:CAT), Uber Technologies Inc (NYSE:UBER), The Walt Disney Co (NYSE:DIS) and Eli Lilly and Co (NYSE:LLY). 

Closer to home UK investors will be paying close attention the Bank of England’s rate decision on Thursday, while earnings continue to come out including FTSE 100 heavyweights such as BP (LSE:BP.), Diageo (LSE:DGE), Glencore (LSE:GLEN) and Legal & General Group (LSE:LGEN).

BANK OF ENGLAND PREVIEW

The Bank of England will decide on interest rates on Thursday and expectations are for a quarter-point cut to 4%. 

Although the central bank kept rates unchanged at its previous decision meeting, the vote split was more divided than expected with three Monetary Policy Committee (MPC) members voting in favour of a cut, highlighting the inconclusive picture of the economy painted by the data.

In May, when the Bank last cut rates, there was an even greater split among MPC members. The committee is likely to be divided again this week with the potential for some members to vote for a bigger cut, while some could vote for a hold. 

There are clear signs of economic deterioration, particularly stemming from the labour market, that warrant a dovish stance. Yet policymakers must weigh this against the risk of inflationary pressures, particularly with rising food prices and international uncertainty around Trump’s tariffs and volatility in energy markets. The latest PMI figures also point to the risk of inflation via growing cost pressures on British businesses. 

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While this week’s cut is widely expected, it is unclear whether that is it for 2025 or if there will be another cut in November. 

Aside from the decision, the Bank of England will also release its August Monetary Policy Report. The focus will be on its projections, with the potential for an increase to its inflationary forecasts. 

The first half of the year was characterised by a clear uptrend for cable (GBP/USD), but since the start of July that trade has reversed course with significant sterling selling and dollar buying.

BP 

BP (LSE:BP.) will deliver its second-quarter results on Tuesday 5 August. It looks like cost-cutting will be in focus after the Financial Times reported that activist investor and 5% stakeholder Elliott Management is putting pressure on the energy giant to cut expenses. Ahead of results, BP said it made its largest oil discovery in 25 years, lifting the stock by around 1%. 

However, weaker refining margins and lower volumes have been a mainstay of performance over recent quarters. The weakening macroeconomic backdrop and OPEC+’s strategy shift towards boosting production are expected to keep a lid on oil prices and are key headwinds for BP. 

Earlier this month, BP warned its quarterly earnings will be weighed down by lower oil and gas prices. However on a more positive note, BP raised its production guidance in July with expectations for an improvement in upstream output quarter-on-quarter. 

In the first quarter, BP reported underlying replacement cost profit of $1.38 billion, shy of forecasts for $1.53 billion. According to Refinitiv, that figure is expected to rise to $1.8 billion in the second quarter, although that represents a sharp drop from $2.8 billion in the same quarter last year. BP is guiding for average refining margins to increase to $21.1 a barrel from $15.2 a barrel in the first quarter. 

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Oil trading will also be in focus for BP after rival Shell (LSE:SHEL) reported a disappointing trading performance in the quarter - it struggled to deal with the speculative market volatility over the period. 

All eyes will be on any changes to cash returns for shareholders after BP lowered its share buyback in April. The dividend will also be closely watched – it has a punchy yield of 6% thanks to BP’s sheer scale that makes it an attractive stock within the income investor community.  

BP has been refocusing itself back towards oil and gas, shifting away from renewables to please investors and boost its share price. Higher interest rates and an inhospitable stance towards the green energy transition from the Trump administration have pushed energy companies such as Shell, Equinor ASA ADR (NYSE:EQNR) and BP back towards fossil fuels. Most recently, this was evidenced by a Bloomberg report last week to suggest that BP is abandoning a planned green hydrogen production facility in Australia. 

Shares in BP are flat so far in 2025 but are down around 7% over the past year. It has sharply underperformed rival Shell, with that discrepancy contributing to the takeover speculation last month that Shell denied. BP remains the underdog, with Shell the preferred name by analysts. Shell has a buy recommendation from the analysts whereas BP remains a hold.