The Morning Message

Morning all.

Good morning. Markets are waking up to the possibility that diplomacy between the US and Iran might not be dead after all. Whether Donald Trump is genuinely close to a breakthrough is another matter. But for central banks and households hoping for calmer oil prices and less inflationary pressure, even the possibility is welcome.

We've been here before, though. So, let's take our lead from the Bank of England (and the Fed and the ECB) on this one: stay calm, keep monitoring things and don't carried away just yet.

Markets

The Number

5

Months since the joint US-Israeli strikes on Iran began.

The Big Story

We've heard this one before

Donald Trump's at it again, using apocalyptic threats to try to drive Iran to the negotiating table. This time, though, central bankers and consumers will be hoping he means it.

Over the weekend, Trump claimed on Truth Social that Iran and several Middle Eastern countries had asked him to delay further strikes because the outlines of a peace agreement had been reached. He suggested negotiations were moving quickly. Iranian officials later disputed those claims.

There are several reasons Trump may want a breakthrough in talks at this juncture. Congress returns from recess in September, when discussions over additional Pentagon funding for the conflict are expected to resume. Historically, lawmakers have been far more willing to back military action when there is a clear threat to US national security or significant American casualties. Neither appears to apply at present.

The regional picture is complicated. Houthi-Saudi tensions remain unresolved, Iran-backed militias in Iraq recently exchanged strikes with US forces, and there is the risk that the conflict could become increasingly entangled with the war in Ukraine, given Kyiv's long-standing claims that Iran is supplying Russia with weapons. Any credible sign that diplomacy is gaining traction would help calm fears that today's conflict could evolve into something much broader. For markets, the key question is no longer just whether the conflict continues, but whether it broadens into a wider regional war, and what that could mean for oil prices.

The Boardroom

My Oh IMI

IMI's first half cash flow results were eye watering (although there are reasons).

The company, which manufactures specialist industrial valves and control systems, reported revenue growth of 6%, while operating profit rose by 27%. Operating cash flow rose by 32%, although part of that increase reflected working capital movements rather than underlying trading.

Trade payables (amounts owed to suppliers) jumped up significantly over the period, meaning IMI is currently holding onto more cash which will be paid out in due course.

Intertek passes the test

Intertek's results passed the inspection.

The company, which carries out inspections and product testing for a range of industry sectors, including energy and food, saw revenue increase by 6.1%, and operating cash flow rise by 27.2%.

Again, cash generation was impressive. Management attributed this largely to strong cash conversion, turning profits into cash through effective cash flow management.

Melrose still strong despite overheating

Melrose said the overheating incident at the Garden Grove facility in California had influenced results, but the company's outlook was nonetheless generally positive.

The company's first half performance showed revenue growth of 10% while operating profit rose by 16%.

The incident at the Garden Grove facility in May apparently cost the company £16million in revenue and £9 million in operating profit.

Pearson's starship enterprise gathers pace

The British educator turned in some impressive results, and the Enterprise Learning and Skills department definitely played its part.

British education company Pearson showed underlying group revenue growth of 4%. Group operating profit was also up by 14%.

The company noted continued momentum in Enterprise, including a new agreement with a leading AI lab to deliver their global certification programme, and strategic account growth with a new partnership with Adobe.

Around the World

The migrant crossings into Ceuta have become part border crisis, part European political battleground.

After tens of thousands of migrants crossed into the Spanish city of Ceuta from neighbouring Morocco this week, Spain has been working to regain control of its border against a backdrop of political debate around what the event signifies for Europe more broadly.

The crossings have placed significant pressure on Spain's border authorities. But, as the BBC reports, reaching Ceuta does not mean migrants can simply continue into mainland Spain. Anyone attempting to travel onwards would still face further Spanish border controls.

Spain has accused Italy of using the crisis for domestic political purposes by portraying it as evidence of Spain's weak approach to border security. The accusation comes as Italian Prime Minister Giorgia Meloni seeks to reinforce her hardline stance on immigration ahead of elections in 2027, with competition from other right-wing parties also increasing.

Quick Hits

The Take

Rupert Lowe's (Restore) offer to work with Reform leader Nigel Farage could matter more than the headlines suggest.

Labour has recovered in the polls since Andy Burnham became Prime Minister. Meanwhile, the Conservatives, Reform and Restore are competing for the right-of-centre vote. Under first-past-the-post, elections are decided by seats rather than vote share. That means cooperation between parties can make a significant difference in marginal seats.

Lowe's offer comes with conditions, including a commitment not to do a deal with the Conservatives. There would therefore still be some vote-splitting, but cooperation between Reform and Restore could reduce it in some constituencies.

The political theatre will grab the headlines. The electoral arithmetic could ultimately prove more important.

Before You Go

And that's us.

Until tomorrow,
Sean