London close: Defence shares rise as equities finish higher

(Sharecast News) - London stocks closed higher on Tuesday, with defence shares pacing the gains after Andy Burnham appointed former defence secretary John Healy as chancellor, surprising markets after reports had suggested Shabana Mahmood or Ed Miliband were more likely contenders.

The FTSE 100 rose 0.58% to 10,585.91, while the FTSE 250 advanced 0.9% to 23,752.40.

Sterling was weaker, with the pound down 0.42% against the dollar at $1.3375 and 0.34% lower against the euro at �1.1726.

"Traders have been treated to an odd sight today as oil prices rise in tandem with equities and precious metals," said Chris Beauchamp, chief market analyst at IG.

"Usually the former rises at the expense of the latter two, but then this week was always going to be a tug-of-war between earnings season and the news from the Middle East.

"While both sides continue to work their way through their weapons stockpiles, it seems like neither want to start climbing the escalation ladder.

"Gold continues to hold $4000, though with the dollar on its way up again this state of affairs may not last."

David Morrison, senior market analyst at Trade Nation, noted that European stock indices were modestly higher as investors balanced improved sentiment around semiconductors with continued geopolitical risks.

"Investors kept a close eye on US stock index futures as a rebound in semiconductor and AI-adjacent stocks helped to lift all the majors.

"They were also balancing the risks of a serious energy supply disruption against hopes that further diplomacy may prevail as the US and Iran continue their relatively low-level attacks on each other."

UK jobless rate holds steady in May quarter

In economic news, the UK unemployment rate held steady at 4.9% in the three months to May, unchanged from the previous month and slightly below forecasts for 5.0%, according to the Office for National Statistics.

However, the figures continued to point to a softening labour market, with vacancies falling again over the quarter and private sector regular wage growth slowing to 2.9%, the first time since 2020 that it has fallen below 3%.

"Vacancies fell again over the quarter, but by less than in recent periods," said Liz McKeown, director of economic statistics at the ONS.

"The latest decrease was driven mainly by smaller businesses, where labour and operating costs were cited as factors in not taking on new staff."

Separate ONS figures showed that public sector net borrowing excluding public sector banks fell to �16bn in June, down �7.9bn from a year earlier and �0.3bn below the Office for Budget Responsibility forecast.

Analysts had expected borrowing of �19.8bn.

The ONS said the reduction reflected higher receipts and slightly slower spending, helped by lower inflation-linked debt interest costs, although it warned that debt remained high by historical standards and close to the annual value of the UK economy.

Food inflation meanwhile slowed to its lowest rate in nearly two years in July, according to Worldpanel by Numerator.

Like-for-like grocery inflation eased to 2.6% in the four weeks to 12 July, marking the fifth consecutive month of slowing price growth, with prices falling fastest in chilled butter and spreads, cold soft drinks and sugar confectionery.

Fraser McKevitt, head of retail and consumer insight at Worldpanel, said the easing would be "welcome news" for shoppers, but added that "the annual bill tells a fuller story".

He said the average household spent �5,530 on groceries over the 12 months to July, up �156 on the previous year, showing that the cumulative cost of the weekly shop was still rising.

Take-home grocery sales rose 3.3%, boosted by hot weather and sporting fixtures including England's progress through the football World Cup, while shoppers made 497m trips over the four-week period, the highest number since March 2020.

Lidl's market share rose to 8.5% from 8.3% a year earlier, while Aldi's dipped to 10.8% from 11%.

Morrisons returned to growth, with sales up 3.5% over the 12 weeks to 12 July, while Tesco sales rose 1.7%, Sainsbury's increased 2.8%, Ocado sales jumped 14.1% and Marks & Spencer's grocery-only sales surged 16%.

Defence stocks rally, Compass Group in the red

In equity markets, defence stocks rallied on Healy's appointment.

Babcock International rose 7.61%, BAE Systems gained 1.3%, Rolls-Royce added 0.95% and QinetiQ advanced 3.14%.

Elsewhere, Mitie Group rocketed 39.07% after the outsourcing and energy services firm agreed to be bought by rival OCS Group in a �3.1bn deal.

Rosebank Industries jumped 8.36% after saying 2026 adjusted operating profit and earnings per share were set to be ahead of analysts' expectations.

Kier Group rose 4.76% after the construction and infrastructure firm said full-year profit and revenue would be at the top end of market expectations, as strong first-half trading momentum continued into the second half.

On the downside, Compass Group fell 1.68% despite saying it delivered another "strong" quarter, with organic revenue growth of 7.1% as net new business accelerated into its 4% to 5% target range, which it expects to hit for a fifth consecutive year.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 10,585.91 0.58%

FTSE 250 (MCX) 23,752.40 0.90%

techMARK (TASX) 5,894.89 0.16%

FTSE 100 - Risers

Antofagasta (ANTO) 3,667.00p 5.83%

Marks & Spencer Group (MKS) 398.30p 4.84%

Fresnillo (FRES) 2,566.00p 4.44%

Babcock International Group (BAB) 1,080.50p 4.04%

Burberry Group (BRBY) 1,086.50p 3.72%

Anglo American (AAL) 3,478.00p 3.36%

Glencore (GLEN) 527.90p 3.13%

Lion Finance Group (BGEO) 11,550.00p 3.03%

Metlen Energy & Metals (MTLN) 44.08p 2.61%

Smiths Group (SMIN) 2,626.00p 2.42%

FTSE 100 - Fallers

SEGRO (SGRO) 869.40p -3.49%

Flutter Entertainment (DI) (FLTR) 7,736.00p -3.01%

London Stock Exchange Group (LSEG) 8,600.00p -2.76%

JD Sports Fashion (JD.) 85.82p -2.63%

Reckitt Benckiser Group (RKT) 4,938.00p -2.57%

Relx plc (REL) 2,454.00p -2.54%

Autotrader Group (AUTO) 490.00p -2.43%

Experian (EXPN) 2,700.00p -2.24%

BT Group (BT.A) 192.35p -2.24%

Unilever (ULVR) 4,553.00p -1.85%

FTSE 250 - Risers

Mitie Group (MTO) 210.00p 39.07%

Ceres Power Holdings (CWR) 395.40p 12.59%

Ocado Group (OCDO) 194.50p 9.76%

Rosebank Industries NPV (ROSE) 324.00p 8.36%

Hochschild Mining (HOC) 445.80p 5.44%

Kier Group (KIE) 233.40p 4.76%

Pan African Resources (PAF) 92.50p 4.46%

Seraphim Space Investment Trust (SSIT) 152.60p 4.23%

THG (THG) 31.60p 4.22%

Raspberry PI Holdings (RPI) 686.00p 4.10%

FTSE 250 - Fallers

WPP (WPP) 274.60p -4.92%

Lancashire Holdings Limited (LRE) 631.50p -4.03%

GB Group (GBG) 219.00p -3.10%

Mony Group (MONY) 198.60p -2.74%

Rightmove (RMV) 439.10p -2.57%

Telecom Plus (TEP) 870.00p -2.03%

Pagegroup (PAGE) 168.10p -1.75%

Hays (HAS) 53.80p -1.56%

Dunelm Group (DNLM) 864.50p -1.54%

Watches of Switzerland Group (WOSG) 758.50p -1.49%