London midday: FTSE turns higher as Healy appointment boosts defence sector

(Sharecast News) - London stocks had turned higher by midday on Tuesday, with defence names pacing the gains after Andy Burnham appointed former Defence Secretary John Healy as chancellor.

The FTSE 100 was up 0.4% at 10,561.18, reversing earlier losses.

Dan Coatsworth, head of markets at AJ Bell, said: "John Healey's surprise appointment as chancellor hasn't troubled the markets as he is seen as a safe pair of hands.

"His extensive parliamentary career including roles in the Treasury are seen as putting him in good stead.

"Bond markets reacted favourably, with gilt yields easing back after a jump yesterday afternoon when prime minister Andy Burnham made remarks about fiscal flexibility. While he has pledged to stick to existing rules, he implied there is some wriggle room within them.

"The comments initially caught the market off guard, but Burnham was quick to say he wouldn't take any risks with the economy.

"Burnham has wasted no time in laying out initiatives to change the country and benefit the public, including the removal of VAT on household electricity bills. This will be funded by the cancellation of the digital ID programme.

"It's a quick win for the new team, but Healey knows bond markets won't allow him to make other tax cuts without saying how they'll be paid for. Bond markets take no prisoners, and they will be quick to protest if government policies are viewed as irresponsible."

Healy's appointment was unexpected as press reports had suggested that Burnham would opt for Shabana Mahmood or Ed Miliband for the role of finance minister.

On the macro front, figures from Office for National Statistics showed the unemployment rate held steady in May, although other indicators continued to point to a softening jobs market.

The unemployment rate was 4.9% in March to May, unchanged on the previous month and marginally below forecasts for 5.0%.

However, the number of vacancies fell over the quarter - albeit by less than in recent periods - while private sector wage growth slowed

Including bonuses, total earnings rose 4.3% in March to May, or by 3.4% once the extra payments were stripped out. On an annual basis, public sector regular earnings sparked 5.5%. But in the private sector, annual wage growth slowed to 2.9%, the first time since 2020 that growth has dipped below 3%.

Liz McKeown, director of economic statistics at the ONS, said: "Vacancies fell again over the quarter, but by less than in recent periods. The latest decrease was driven mainly by smaller businesses, where labour and operating costs were cited as factors in not taking on new staff."

Separately, the ONS also confirmed that public sector net borrowing excluding public sector banks was �16bn in June, down �7.9bn on the same month a year previously and �0.3bn below the Office for Budget Responsibility forecast. The City had been anticipating a smaller decline, to �19.8bn.

The ONS attributed the reduction to higher receipts alongside slightly slower expenditure, on the back of lower inflation-linked debt interest costs. But it acknowledged: "Debt remains high by historical standards and close to the annual value of the entire UK economy."

In commodity markets, oil prices were off their highs amid reports of ongoing diplomatic efforts between the US and Iran. Brent crude was up 0.3% at $89.47 a barrel, while West Texas Intermediate was 0.3% higher at $83.49 after it was reported that mediators had proposed a 10-day ceasefire to revive an interim US-Iran agreement.

However, news that Yemen's Iranian-backed Houthis have introduced a naval blockade against Saudi Arabia was also in focus.

In equity markets, defence stocks rallied, with Babcock, BAE Systems, Rolls-Royce and Qinetiq all higher on the back of former Defence Secretary Healy's appointment as chancellor.

Neil Wilson, UK investor strategist at Saxo Markets, said: "His appointment is interesting since he has repeatedly called on the government to raise defence spending to 3% of GDP and resigned from Keir Starmer's cabinet over this point and backed the idea of war bonds - new issuance to cover the cost of extra defence spending."

Outsourcing and energy services firm Mitie rocketed as it agreed to be bought by rival OCS Group in a �3.1bn deal.

Rosebank Industries shot up as it said 2026 adjusted operating profit and earnings per share were set to be ahead of analysts' expectations.

Kier Group jumped as the construction and infrastructure firm said full-year profit and revenue would be at the top end of market expectations as strong trading momentum in the first half continued through the second half of the year.

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

Market Movers

FTSE 100 (UKX) 10,561.18 0.35%

FTSE 250 (MCX) 23,691.32 0.64%

techMARK (TASX) 5,901.62 0.27%

FTSE 100 - Risers

Babcock International Group (BAB) 1,097.50p 5.92%

Antofagasta (ANTO) 3,600.00p 4.01%

Marks & Spencer Group (MKS) 393.80p 3.53%

Fresnillo (FRES) 2,520.00p 2.77%

Glencore (GLEN) 526.40p 2.73%

BAE Systems (BA.) 1,919.00p 2.51%

Burberry Group (BRBY) 1,069.50p 2.20%

Anglo American (AAL) 3,434.00p 2.11%

Rolls-Royce Holdings (RR.) 1,382.40p 1.91%

Lion Finance Group (BGEO) 11,390.00p 1.61%

FTSE 100 - Fallers

SEGRO (SGRO) 875.20p -2.49%

ICG (ICG) 1,809.00p -2.32%

Autotrader Group (AUTO) 491.70p -1.97%

Convatec Group (CTEC) 214.40p -1.74%

Experian (EXPN) 2,703.00p -1.70%

Admiral Group (ADM) 3,516.00p -1.68%

Relx plc (REL) 2,475.00p -1.63%

Compass Group 11 (CPG) 31.08p -1.55%

Tesco (TSCO) 471.50p -1.48%

The Sage Group (SGE) 837.60p -1.41%

FTSE 250 - Risers

Mitie Group (MTO) 210.00p 39.07%

Rosebank Industries NPV (ROSE) 340.00p 14.72%

Ceres Power Holdings (CWR) 383.40p 9.17%

Kier Group (KIE) 234.40p 5.30%

Pan African Resources (PAF) 92.45p 4.46%

Genuit Group (GEN) 277.00p 4.06%

QinetiQ Group (QQ.) 468.00p 3.54%

Pacific Horizon Inv Trust (PHI) 1,074.00p 3.47%

Endeavour Mining (EDV) 3,522.00p 3.01%

Hochschild Mining (HOC) 435.00p 2.98%

FTSE 250 - Fallers

Mony Group (MONY) 194.10p -5.00%

GB Group (GBG) 218.00p -3.54%

SDCL Efficiency Income Trust (SEIT) 37.50p -2.72%

WPP (WPP) 280.40p -2.60%

Lancashire Holdings Limited (LRE) 641.00p -2.36%

Dunelm Group (DNLM) 857.00p -2.28%

Rightmove (RMV) 440.40p -2.13%

Bridgepoint Group (Reg S) (BPT) 305.00p -1.87%

Hansa Investment Company Limited (DI) (HAN) 320.00p -1.84%

Vietnam Enterprise Investments (DI) (VEIL) 706.00p -1.67%