The FTSE 100 closed modestly higher on Tuesday as investors weighed the UK government’s latest defence spending plans alongside signs of cooling inflation in Europe.
London’s blue-chip index ended up 12.90 points, or 0.1%, at 10,497.12. The FTSE 250 slipped slightly to 23,013.45, while the AIM All-Share rose 2.06 points, or 0.3%, to 772.17.
In the US, equities were also firmer, with the Dow Jones Industrial Average up 0.1%, the S&P 500 rising 0.5% and the Nasdaq Composite gaining 1.1%. US Treasury yields edged higher, with the 10-year yield at 4.40% and the 30-year yield at 4.89%.
Back in the UK, revised data from the Office for National Statistics confirmed that real GDP grew by 0.6% in the first quarter.
Defence shares were among the main gainers in London after Prime Minister Keir Starmer announced plans to spend almost £300 billion over the next four years to modernise the UK’s armed forces. The long-awaited 10-year Defence Investment Plan includes additional funding for drones, uncrewed vehicles and upgrades to the UK’s nuclear deterrent.
The proposals include an extra £15 billion for defence spending up to 2030, which Starmer described as a “huge historic shift” for the country.
Babcock International rose 3.3%, BAE Systems gained 2.0% and QinetiQ climbed 2.4% as investors responded positively to the prospect of increased defence investment.
Brent crude traded slightly higher at USD73.04 a barrel, up from USD72.85 on Monday, while gold rose to USD4,032.83 an ounce from USD4,023.68.
On the FTSE 100, Sainsbury’s rose 1.3% after reporting a better-than-expected quarterly sales update. The supermarket group said total retail sales, excluding fuel, increased 2.7% year-on-year to £9.15 billion in the 16 weeks to June 20. Like-for-like sales, excluding fuel, rose 2.1%, ahead of consensus expectations.
Sainsbury’s said it had made an encouraging start to the year, although it cautioned that the impact of the Middle East conflict remained uncertain.
Shell gained 1.1% following reports that it is close to selling its South African fuel station network to a unit of Abu Dhabi National Oil for around USD1 billion. The deal would reportedly give Adnoc control of around 600 retail fuel outlets in South Africa, equal to roughly 10% of the market.
The biggest FTSE 100 risers were Polar Capital Technology Trust, Babcock International, Scottish Mortgage Investment Trust, Melrose Industries and St James’s Place.
The biggest fallers were Entain, Smith & Nephew, Vodafone, BT and Burberry.
Looking ahead, Wednesday’s economic calendar includes manufacturing PMI reports, eurozone inflation data and the ADP private payrolls report in the US. On the UK corporate calendar, investors will watch trading updates from Primark owner Associated British Foods and retailer Topps Tiles.
