London stocks began the week strongly on Monday, with the FTSE 100 climbing 0.7% as investors looked ahead to Wednesday’s Autumn Budget and major central bank interest rate decisions, while Computacenter and defence companies led the market higher.
The FTSE 100 gained 76.97 points to close at 10,767.33, while the FTSE 250 advanced 1.1% to 24,501.25. The AIM All-Share rose 0.9% to 753.18, reflecting a broader recovery across UK equities.
Investor attention is focused on Chancellor John Healey’s Budget on 28 October, with markets looking for reassurance over government borrowing, public spending and the outlook for economic growth.
Fidelity International investment director Tom Stevenson said the reaction in bond and currency markets could prove more important than individual tax measures, particularly with long-term UK government borrowing costs approaching 6%.
The Government is reportedly preparing a £20.4 billion investment package for the National Wealth Fund and British Business Bank, aimed at supporting growth in artificial intelligence, defence, green energy and infrastructure.
Under the proposals, the National Wealth Fund would receive an additional £15.4 billion, including £2 billion for a renewables-focused Energy Wealth Fund.
The British Business Bank would receive a further £5 billion, increasing its financial capacity to £30.6 billion, with the wider investment programme expected to support around 100,000 jobs by 2035.
Deutsche Bank economist Sanjay Raja described the scale of the proposed investment as larger than expected, suggesting it would allow the Chancellor to present the Budget as focused on economic growth.
Computacenter was the FTSE 100’s standout performer, surging 13% to 5,190p, after upgrading its full-year adjusted pre-tax profit expectations.
The technology services provider now forecasts 2026 adjusted pre-tax profit of at least £425 million, comfortably ahead of company-compiled market expectations of £387.1 million, following stronger-than-anticipated third-quarter trading.
Defence and aerospace stocks also attracted substantial buying interest amid expectations of increased government spending on national security.
Babcock International climbed 6.4%, Rolls-Royce gained 6.1%, BAE Systems rose 4.1% and Melrose Industries advanced 3.5%.
Prime Minister Andy Burnham said the Budget would outline a pathway towards increasing defence expenditure to 3% of national income by 2030, supporting interest in companies exposed to military equipment and aerospace programmes.
Engineering specialist TEK4 made a strong AIM debut, with shares jumping nearly 50% from their 200p flotation price to close at 299p.
The Leicestershire-based manufacturer, which produces specialist machinery for drilling cooling holes in jet engines and industrial gas turbines, entered the market with an initial valuation of approximately £42 million.
The listing involved £24.8 million in fundraising and share sales, including £2 million raised through new shares issued by the company and £22.8 million benefiting existing selling shareholders.
European stocks also advanced, with France’s CAC 40 rising 0.8% and Germany’s DAX gaining 0.9%.
Wall Street traded higher around London’s close, with the Dow Jones Industrial Average gaining 0.3%, the S&P 500 advancing 0.8% and the Nasdaq Composite rising 1%.
Investors were also assessing developments in the artificial intelligence sector after Anthropic made public its plans for a stock market flotation, revealing rapid revenue growth alongside substantial infrastructure spending and regulatory risks.
The AI developer reported quarterly revenue of $11.6 billion for April to June, compared with $787 million a year earlier, demonstrating the scale of its expansion.
However, the company’s filing also highlighted concerns surrounding computing costs, AI safety and political uncertainty, reinforcing investor scrutiny of valuations across the sector.
Brent crude rose to $117.02 a barrel, compared with $116.34 on Friday, keeping energy prices and inflation risks in focus.
Gold strengthened to $4,017.92 an ounce, while the US 10-year Treasury yield eased to 4.98%.
In currency markets, sterling traded at $1.3353 against the dollar, slightly lower than Friday, while the euro stood at $1.1183.
The week also brings interest rate decisions from the US Federal Reserve, European Central Bank and Bank of Japan, with markets generally expecting borrowing costs to remain unchanged.
JPMorgan expects the Federal Reserve to maintain its target range at 3.75% to 4%, although policymakers may signal that further tightening remains possible if inflation proves persistent.
The FTSE 100’s strong opening to the week reflects improving investor appetite for selected UK equities, particularly companies benefiting from stronger earnings forecasts and expectations of increased government investment.
Attention now turns to Tuesday’s HSBC results and Reckitt Benckiser trading update, followed by Wednesday’s Budget and central bank announcements, which could set the direction for markets over the remainder of the week.
