FTSE 100 Stuck Near Flat as Inflation Concerns Weigh on UK Index

The FTSE 100 index in London has struggled to rise despite higher oil prices and a rally on Wall Street. The benchmark slipped about 0.1% in early trade, broadly matching a cautious session across Europe. Germany's DAX was up 0.1%, France's CAC 40 fell 0.2%, and the pan-European STOXX 600 eased 0.1% to 648.67.

The immediate focus for London investors is August's US employment report, which could shape expectations for the Federal Reserve's September meeting. Consensus forecasts point to a 55,000 increase in nonfarm payrolls after a 23,000 decline in July, with unemployment expected to hold at 4.1%. Fed Governor Christopher Waller's more dovish comments on Thursday had already helped pull bond yields lower and reduced fears of an imminent rate increase.

ING analysts said a payroll gain below 25,000, alongside a benign core inflation reading next week, may be needed to materially delay another rate rise. Sterling also firmed against the dollar, trading around $1.3542 in early dealings. This can create a mild headwind for the FTSE 100 because many of its largest companies earn heavily overseas and translate those earnings back into pounds.

The energy sector remains an important factor for the London market. Brent crude traded close to $96 a barrel on Friday and was heading for its strongest weekly advance since mid-July as renewed US-Iran tensions kept supply risks elevated. Higher crude can support the FTSE's heavyweight energy names, but the broader inflation implications are less helpful for equities.