Morning Note: Market News and an Update from Bunzl.
Market News
Bond prices around the world continued to fall as investors demand greater compensation after years of heavy government spending, persistent inflation, and a surge in corporate borrowing to finance the AI build-out.
The yield on the US 10-year Treasury note climbed to 4.78%, its highest level since January 2025 as rising oil prices and hawkish signals from the Federal Reserve strengthened expectations for a rate hike this month. Investors also braced for a busy economic calendar, with the latest US manufacturing and services activity data due later today, ahead of the highly anticipated August jobs report on Friday. Fed Chair Warsh said on Friday that the central bank will “have work to do” if policymakers lack the confidence they need that inflation is moving toward 2%. Elsewhere, Japan’s 10-year yield reached 3% for the first time since 1996, while UK 10-year gilt yields climbed above 5.2%, the highest level since 2008.
Brent crude advanced to $91.70 a barrel on renewed fighting in the Middle East, while gold slipped to $4,430 an ounce.
While bond yields and oil are rising, there was little spillover into the broader equity market. In the US last night, the main indices traded slightly lower – S&P 500 (-0.3%); Nasdaq (-0.1%) – while in Asia this morning, markets were little changed: Nikkei 225 (-0.2%); Shanghai Composite (-0.2%); Kospi (+0.2%).
The FTSE 100 is currently 0.5% lower at 10,762, while Sterling trades at $1.3535 and €1.1675. Vulcan Alpha (owned by Veritas Capital) and Bodycote have announced an agreed bid for the UK engineering company for 940p a share, which includes an interim dividend of 7.8p. The £1.64bn bid represents a 25.3% premium to the closing price on 4 August, the last business day before commencement of the offer period.
Source: Bloomberg
Company News
Bunzl has this morning released results for the first half of 2026 which were ahead of market expectations. Performance was driven by underlying growth in all regions and margin expansion. The company has raised its guidance for the full year and announced a new £500m share repurchase programme. In response the shares have been marked up by 3% in early trading.
Bunzl is a specialist international distribution and services group. The company provides an efficient and cost effective one-stop-shop solution to enable its customers to reduce or eliminate the ‘hidden’ costs of sourcing and distributing a broad range of goods that are essential to the successful operation of their businesses but which they do not themselves resell – think disposable tableware, rubber gloves, and plastic trays. The strategy is to expand the business through organic growth, consolidating markets through focused acquisitions, and continuously improving operating efficiency. The group is also supporting customers looking to transition towards packaging better suited to the circular economy, with around half of Bunzl’s packaging sales made from alternative materials.
Today’s statement highlights that the macroeconomic backdrop remains uncertain with challenging end markets and volatile input prices. The company has seen continued operational improvement in North America Distribution, with service levels and product availability restored. There have been 15 warehouse consolidations and relocations, alongside continued investments into digital solutions and automation. A significant warehouse consolidation project in France is now fully operational.
In the first six months of 2026, revenue rose by 2.9% at constant exchange rates (CER) to £5.9bn. Adjusted for acquisitions, underlying revenue was up by 3.2%, supported by both volume growth, led by North America, and inflation, driven by product cost increases in the second quarter.
Approximately 30% of revenue was delivered through the sale of own brand products, while the company processed 78% of orders digitally, supporting customer stickiness and increasing low touch customer ordering.
Underlying revenue rose by 4.6% in North America (the group’s largest division, 52% of revenue), while adjusted operating profit increased by 3.4%. The division delivered encouraging volume growth across customers, supported by new business won in the second half of 2025. Continental Europe revenue rose by 2.1%, although profit jumped by 8.9% due to inflation in Turkey and Spain. Elsewhere, revenue in the UK & Ireland and the Rest of the World rose by 1.3% and 1.9%, respectively.
Group adjusted operating profit rose by 8.9% at CER to £380.9m. The operating margin rose from 7.0% to 7.3%, driven by the net impact of inflation, much of which is expected to be temporary in nature, and supported by the annualisation of initial synergies from the Nisbets deal. Adjusted EPS increased by 11.4% to 88.7p.
Cash conversion (90% of operating profit) and the balance sheet remain robust. At the end of June, leverage was 1.8x adjusted net debt to EBITDA, below its target range of 2.0x to 2.5x. The company has announced a 3.0% increase in its half-year dividend to 20.8p. The company has grown its payout for 33 years in a row; the yield is currently 3%.
The company has a strategy to make value-accretive acquisitions to supplement growth. In the year to date, the company has completed two bolt-on deals and continues to expect 2026 to be an improved year for acquisitions compared to 2025, with a more active second half as deal momentum is building.
A new £500m buyback programme has been announced, to be completed over the next 12 months, reflecting the group’s policy of distributing excess cash whilst maintaining headroom for high return bolt-on acquisitions, which remain a priority.
Looking ahead to the full year, Bunzl has upgraded its 2026 guidance. The company continues to expect modest underlying revenue growth and now expects its operating margin to be broadly flat year-on-year at 7.6%, with modest adjusted operating profit growth at constant exchange rates.
Source: Bloomberg
