UK Stagflation Deepens as FTSE Holds Neutral

index Update: The FTSE 100 index, a key benchmark index for the London Stock Exchange, was trading rose around 0.31% on 13 May 2026. 

Macro Update: The UK economy faces stagnation with 2026 GDP growth downgraded to 0.8% amid escalating 3.3% Inflation driven by global energy shocks. While the dominant services sector expands slightly, Manufacturing flatlines and retail spending plummets. Paused Interest Rate cuts and 28-year high borrowing costs further strain public finances, housing, and domestic construction sectors. 

Top Market Movers: Among top gainers on FTSE 100 index, Intertek Group PLC (LSE: ITRK) witnessed a rise of 6.70% followed by Metlen Energy & Metals PLC (LSE: MTLN) witnessed a rise of 4.96%. 

Commodity Update: The U.S. dollar stayed near a one-week high on Wednesday after stronger-than-expected U.S. inflation data pushed Treasury yields higher and weakened overall risk sentiment. Gold climbed 0.27% to USD 4,699.40, silver advanced 1.75% to USD 87.08, and copper gained 0.67% to USD 14,117.70. Brent Crude slipped 0.76% to USD 106.95 after three straight sessions of gains, while investors tracked Middle East tensions and awaited talks between Donald Trump and Xi Jinping. 

Our Stance: We forecast structural UK stagnation as energy shocks drag 2026 GDP growth down to 0.8% and fuel 3.3% inflation. While resilient services buffer immediate collapse, paused rate cuts and record borrowing costs will severely suppress retail, manufacturing, and housing sectors through the year. 

FTSE 100: The FTSE 100 Index is trading near 10,298.50, remaining slightly below its 50-day SMA near 10,332.72, reflecting a broadly neutral near-term structure. Recent price action indicates ongoing consolidation following the rebound seen in April, with momentum remaining balanced at current levels. The 14-day RSI near 47.40 stays close to the neutral zone, suggesting the absence of strong directional momentum. Immediate support is placed around 10,100–10,00, while resistance is seen near 10,450–10,600, which may influence the index’s next directional move.