Lunchtime market roundup: UK defence stocks up after PM's comments

Stock prices in London were higher on Monday midday with defence stocks boosted after UK Prime Minister Keir Starmer said the country must ‘go faster’ on defence spending; meanwhile investors now believe US interest rates are more likely to remain elevated for longer.

Meanwhile in Geneva, talks between the US and Iran due to start this week.

Tehran and Washington restarted negotiations this month, and considerable uncertainty surrounds the fate of Iran’s stockpile of more than 400 kilogrammes of 60% enriched uranium that was last seen by nuclear watchdog inspectors in June.

The FTSE 100 index was up 27.64 points, 0.3%, at 10,473.99. The FTSE 250 was up 53.93 points, 0.2%, at 23,481.20, and the AIM all-share was up 0.64 points, 0.1%, at 812.49.

The Cboe UK 100 was up 0.4% at 1,043.80, the Cboe UK 250 was up 0.3% at 20,825.15, and the Cboe small companies was up 0.1% at 18,629.40.

‘A strong showing from financials helped to support the FTSE 100 on a quiet day for corporate news,’ AJ Bell’s Dan Coatsworth commented.

NatWest continued to lead the FTSE 100, up 4.5% after the Edinburgh-based lender kicked off its previously announced £750 million share buyback programme, set for completion by January 15 next year.

Defence stocks were also among the biggest winners. Babcock was the third-highest blue-chip, up 3.6%. It was closely followed by Melrose, up 3.6%, and BAE Systems, up 2.9%. BAE is due to report its full-year results on Wednesday.

Notably, UK Prime Minister Keir Starmer has said Britain must ‘go faster’ on defence spending, having already committed to raising it to 2.5% of GDP next year and 3% after the next election.

But the BBC has reported he is now mulling bringing forward the 3% target to 2029, after the head of the UK’s armed forces set out the ‘moral’ case for rearmament.

Asked about the reports at an event in London on Monday, Starmer would not confirm that he was considering bringing forward the target, but said Europe needed to ‘step up when it comes to defence and security’.

Also, Swissquote’s Ipek Ozkardeskaya noted early on Monday that during weekend security talks, the ‘highest US representative was not present’ and Germany’s chancellor ‘Germany and France are not in talks on nuclear deterrence’.

‘Given how strongly Europeans have relied on the US for the continent’s security, the gap left by US disengagement must be filled, and quickly,’ she commented. ‘Hence, European defence stocks will likely continue to benefit from solid inflows.’

Persimmon was down 0.4%. Its main trading brand, Persimmon Homes, has signed a new three-year partnership with London-based property website Zoopla.

The York-based housebuilder will list all its developments and leverage products ‘to drive more, high-quality buyer enquiries while also boosting Persimmon’s brand awareness amongst Zoopla’s high intent consumer audience,’ Zoopla said.

On the FTSE 250, Hunting led with a 5.5% rise after Buccaneer Energy, up 11% on AIM, said oil well production at its Pine Mills field surged by 100% during pilot tests using Hunting’s oil recovery solution.

Pinewood led the laggers, plummeting 31%.

‘Pinewood is a technology provider to car retailers and manufacturers and has gone big in AI-related services,’ Coatsworth explained. ‘Two years ago, that strategic development would have attracted hoards of investors wanting exposure to all things AI. In 2026, the reverse is true...It’s notable that Pinewood’s share price hasn’t simply given up the share price spike from when Apax first revealed takeover interest.

‘The shares have fallen even further as investors are now worrying why a big-name bidder has suddenly walked away, and whether Pinewood is going to be lumped with the multitude of other stocks that have struggled this year due to AI disruption-related fears.’

The Birmingham, England-based firm, which provides software to the automotive retailing sector, noted Apax Partners’ announcement on Friday that it does not intend to make an offer for Pinewood.

On AIM, Surrey, England-based software company Pebble Beach rose 13% following its announcement of a new £1.3 million five-year contract with an unnamed US streaming company.

Tungsten West gained 10%.

The miner, which is focused on restarting production at the Hemerdon tungsten and tin project in Devon, England, said it has executed two supply agreements that cover the major additions for the improvement plan to re-start the Hemerdon Mineral Processing Facility.

In other UK news, Energy Secretary Ed Miliband and California Governor Gavin Newsom have signed an agreement to deepen co-operation across clean energy, climate action and protecting nature.

The two met at the Munich Security Conference in Germany on Monday to agree on the ‘memorandum of understanding’ between the UK and the state government of California. The aim is to boost transatlantic investment, strengthen collaborations between research institutions, support clean energy businesses to access the Californian market, and share expertise on protecting nature and building resilience to extreme weather.

In European equities on Monday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was marginally higher.

The pound was quoted at $1.3647 at midday on Monday in London, higher compared to $1.3628 at the equities close on Friday. The euro stood slightly lower at $1.1864, against $1.1869. Against the yen, the dollar was trading higher at JP¥153.47 compared to JP¥152.56.

US financial markets are closed on Monday for Washington’s Birthday, and Canadian markets are closed for Family Day.

‘Economic data played a key role in shaping market sentiment,’ DHF Capital’s Bas Koojiman noted. ‘The January employment report showed that US employers added 130,000 jobs, the strongest monthly increase in over a year. The unemployment rate also declined slightly to 4.3%...While the strong labour market reflects economic resilience, it reduced expectations for near-term interest rate cuts by the Federal Reserve.

‘Investors now believe rates are more likely to remain elevated for longer.’

Brent oil was quoted lower at $67.75 a barrel at midday in London on Monday from $68.08 late Friday.

Gold was quoted higher at $5,004.12 an ounce against $4,932.33.

Still to come on Monday’s economic calendar, Canada has manufacturing sales data.

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