FTSE 100 investors remain bullish on UK defence – London Report
News yesterday that UK consumer price inflation remained in negative figures for the second straight month – largely due to falls in food and fuel prices – pushed the FTSE up.
The blue-chip index rose by 122.4 points, or 1.99 per cent, to close at 6268.7 pushing up the combined value of UK listed companies by £30bn.
Consumer prices slipped 0.1 per cent from a year ago, the same rate of decline as seen in September, coming in line with economists’ expectations.
“[The] inflation data from the UK continued to show deflationary pressures persisting but these are likely to abate in the coming months as last year’s decline in energy prices begin to fall out of the data,” said Craig Erlam, senior market economist at OANDA.
Engineering company Smiths Group was the biggest winner, up by 10 per cent, after investors piled in following its first-quarter results and an overhaul of how it would fund its pension plan.
The firm’s ties to the defence industry were also seen as a boon to the company.
Other defence companies did well. Rolls-Royce continued its rally, climbing five per cent, the second best FTSE performer.
Expectation for a spike in government defence spending pulled up shares just days after Rolls-Royce issued a profit warning.
BAE Systems also rode the wave, despite last week revealing it was to axe hundreds of jobs, up two per cent.
“What can’t go down must go up,” said Jasper Lawler, market analyst at CMC Markets. “Investors felt confident enough to dip a toe back in the water after markets held steady in spite of the largest drop since August last week and the terrorist attack in Paris,” he added.
In Russia, President Vladimir Putin ordered his military to cooperate with France against Syria and US secretary of state John Kerry said that a “major effort” against the Islamic State extremist group is underway.
Easyjet dived by four per cent as the market dismissed its fifth year of record profits in a row, bringing to an end a long run of share price rises for the budget airline.
British Airways owner IAG and tour operator TUI both rallied following significant dips after the Russian plane crash and the Paris attack earlier in the week.