The FTSE 100 eked out marginal gains on Monday as advances in defence stocks helped offset nerves surrounding renewed US-China trade tensions.
The FTSE 100 index closed up 1.88 points at 8,774.26. The FTSE 250 ended up just 0.96 of a point at 21,028.97, and the AIM All-Share closed up 1.45 points, 0.2%, at 748.13.
Defence stocks climbed as Prime Minister Keir Starmer said the government will increase defence spending to 2.5% of gross domestic product from April 2027 with an ambition – but no firm commitment – to increase it to 3% during the next parliament.
The Prime Minister said he was “100% confident” the plans in the new strategic defence review – including extra attack submarines, £15 billion on nuclear warheads and thousands of new long-range weapons – could be delivered on current funding plans.
On the FTSE 100, Babcock International rose 8.3% while on the FTSE 250, Qinetiq advanced 4.5%.
In European equities on Monday, the CAC 40 in Paris fell 0.2%, while the DAX 40 in Frankfurt eased 0.3%.
European equities were held back by fresh developments in tariffs and renewed fears of a trade war between the US and China.
Late on Friday, US President Donald Trump doubled tariffs on imported steel and aluminium to 50%, starting this Wednesday.
At the same time, tensions with China resurfaced after Beijing rejected Mr Trump’s accusations of violating the Geneva truce struck earlier in May.
On Monday, China’s commerce ministry said it had upheld the deal. It accused Washington of introducing “a series of discriminatory and restrictive measures” in recent weeks that undermined the Geneva consensus and harmed “China’s legitimate rights and interests”.
Hani Abuagla, senior market analyst at XTB MENA, said although US Treasury Secretary Scott Bessent suggested that a call between Mr Trump and China’s President Xi Jinping may take place soon, markets remain wary of further escalation.
“The lack of clear progress risks reigniting trade volatility just as investors look for greater policy clarity,” Mr Abuagla added.
The latest twist in the trade war saga saw renewed falls for the dollar and gains for the euro and sterling.
The pound was quoted up at 1.3546 dollars late on Monday afternoon in London, compared with 1.3476 dollars at the equities close on Friday. The euro stood higher at 1.1429 dollars against 1.1348 dollars. Against the yen, the dollar was trading lower at 142.75 yen compared with 144.23 yen.
The yield on the US 10-year Treasury widened to 4.46% from 4.41% on Friday. The yield on the US 30-year Treasury stretched to 5.00% from 4.92%.
In New York, the Dow Jones Industrial Average was down 0.6% at the time of the London equities close on Monday. The S&P 500 was 0.3% lower and the Nasdaq Composite fell 0.1%.
Investors weighed weaker-than-expected US manufacturing data.
The seasonally adjusted S&P Global US manufacturing purchasing managers’ index recorded 52.0 in May, rising from 50.2 in April. However, it fell short of the 52.3 flash estimate posted late last month.
Meanwhile, figures from the Institute for Supply Management showed economic activity in the manufacturing sector contracted in May for the third consecutive month.
The ISM manufacturing PMI registered 48.5 in May, compared with 48.7 in April, and below the 49.5 consensus.
“Manufacturing is muddling through tariff-related disruptions for the time being rather than falling apart, but the sector remains under intense pressure, with marked increases in the prices of many goods likely in the pipeline,” said Oliver Allen at Pantheon Macroeconomics.
Data in Europe showed manufacturing was also subdued.
The eurozone manufacturing sector remained in contraction in May but got closer to stabilisation, survey results from S&P Global showed on Monday.
The Hamburg Commercial Bank manufacturing purchasing managers’ index rose to 49.4 points in May from 49.0 in April, edging closer to the 50-point no-change mark. The final score was in line with the flash reading published late last month and reflects a 33-month-high.
The PMI reading indicates a further easing of the manufacturing sector slowdown, S&P Global said, with the headline index reaching its highest level since August 2022.
In the UK, the manufacturing sector also stayed in contraction territory in May, amid weak global demand and turbulent market conditions.
The S&P Global UK manufacturing purchasing managers’ index picked up to 46.4 points in May, from 45.4 in April, though it remained below the 50-point neutral mark. The reading topped the 45.1 point flash estimate.
The renewed trade angst saw the price of safe haven gold shine once more. The yellow metal jumped to 3,371.47 dollars an ounce on Monday against 3,286.33 dollars.
On AIM, Eagle Eye plummeted 43%.
The London-based software-as-a-service marketing solutions company said Neptune Retail Solutions has, with effect from August 2, terminated a contract worth between £9 million and £10 million in annual revenue.
It explained that the contract was to provide digital promotional services to a national US grocer, and that NRS in 2023 acquired digital promotions and content provider Quotient Technology Inc.
“The board is confident that this change has no impact on the group’s growth opportunities, which remain strong,” Eagle Eye said.
The biggest risers on the FTSE 100 were Babcock International up 77p at 1,013p, Endeavour Mining, up 154p at 2,406p, Fresnillo, up 70p at 1,233p, Rentokil Initial up 11.6p at 363.2p, and British Airways owner IAG, up 9.2p at 335.3p.
The biggest fallers on the FTSE 100 were Ashtead Group down 177p at 4,158p, WPP, down 17.2p at 582.2p, Taylor Wimpey, down 2.6p at 116.9p, JD Sports Fashion, down 1.56p at 82.5p, and Spirax Group, down 105p at 5,610p.
Brent oil was higher at 64.58 dollars a barrel at the time of the London equities close on Monday, compared with 62.53 dollars on Friday.
Tuesday’s UK corporate calendar has full-year results from utility Pennon Group and a trading statement from tobacco retailer British American Tobacco.
The economic calendar on Tuesday has eurozone CPI and unemployment figures, and US factory orders data.
Contributed by Alliance News
