Defence stocks surge, labour market cools, BP takeover talk emerges
London’s FTSE 100 closed lower on Wednesday, weighed down by investor caution surrounding corporate earnings, Middle East tensions, and ongoing speculation about monetary policy shifts. The decline followed a period of optimism earlier in the week after a ceasefire ended a 12-day conflict between Iran and Israel.
Markets took a fresh turn after the Wall Street Journal reported post-close that Shell is in early talks to acquire rival BP, potentially triggering the largest oil deal in a generation. BP’s U.S.-listed shares jumped 7% on the news, while Shell slipped 3.8%.
The FTSE’s decline came amid broader global hesitancy, with equity markets pausing near record highs as attention turned to U.S. inflation data and the Federal Reserve’s rate path.
UK labour market softens, supporting BoE rate cut case
On the domestic front, signs of labour market weakness continued to build. Surveys showed pay settlements in the private sector are falling behind inflation, while job vacancies — especially graduate roles — are in retreat. Bank of England Governor Andrew Bailey noted on Tuesday that softer labour data makes further rate cuts more likely.
Defence stocks rally on guidance, NATO jet order
Despite the broader pullback, defence names provided a bright spot on the FTSE. Babcock soared 10.7% to lead the index after raising its medium-term outlook, citing rising global defence spending. Rolls-Royce and BAE Systems both advanced around 1%.
Defence sentiment was further boosted after the UK government announced plans to acquire 12 U.S.-made F-35A jets equipped to carry tactical nuclear weapons, reinforcing the sector’s bullish momentum. Defence remains one of the FTSE’s strongest performing sectors in 2024.
Burberry gains, Liontrust slumps
Luxury brand Burberry added 4.8% as several brokerages issued upbeat notes ahead of its July 18 trading update. The fashion house has struggled in recent quarters but optimism is building around a potential turnaround.
On the downside, Liontrust Asset Management plunged 13% after reporting a drop in annual profit. The firm cited tariff-related market volatility and economic uncertainty as key headwinds.
