FTSE slightly higher on fund play

Absence of fresh trade tension news and a rally in Ferguson are helping the FTSE trade slightly higher with the plumbing merchant attracting significant buying as an activist investor increased its stake in the company. But the index's anaemic rally is being held in check by the limbo ahead of the first Tory leadership vote and a plunge in Persimmon's shares.

Retailers' shares are also sliding. The logic goes, if Tesco, the country's biggest retailer, has just reported that it struggled to make profit in the last quarter then its less cost-efficient retail peers are likely to show even lower profits when they report later in the month. Tesco's words of warning that the grocery market remains subdued will do little to change that sentiment.

Parliamentary vote on Tory contenders will narrow the field

For the moment the Tory party leadership contest is still a blur with 10 candidates in the running, all offering mixed messages on Brexit. More clarity will be provided later this afternoon after a vote by Tory MPs narrows down the group as only the candidates that secure 17 votes or more will be left in the contest. The market's general lack of enthusiasm over the outcome is reflected in the pound's weakness against both the dollar and the euro with volumes fairly subdued ahead of the vote.

The dollar is still digesting Wednesday's unimpressive US inflation data which has reinforced investors' expectations that the Fed will start cutting rates sooner rather than later. Money markets are also reacting in kind, with short term US Treasury yields pricing in further rate declines.

Volatility rises in oil on Gulf fire

There has been more volatility in the oil market than usual in the last two days with prices dipping below $60 on Wednesday following reports of higher US crude supplies only to shoot up Thursday morning after an oil tanker was reportedly set on fire in the Gulf of Oman. With the Japanese Prime Minister visiting Iran and the tensions between Iran and Washington on the rise, concerns over safety issues in the Gulf will remain in focus for oil investors.