Lunchtime market roundup: UK defence stocks boosted by government plan

Stock princes in London were higher on Tuesday midday as defence stocks received a boost following the UK government announcing a defence investment plan; meanwhile German inflation data for June will be released shortly.

The FTSE 100 index was up 118.76 points, 1.1%, at 10,602.98. The FTSE 250 was up 146.75 points, 0.6%, at 23,161.60, and the AIM all-share was up 2.63 points, 0.3%, at 772.74.

The Cboe UK 100 was up 1.0% at 1,052.42, the Cboe UK 250 was up 0.5% at 19,865.15, and the Cboe small companies was 0.4% higher at 18,201.74.

In European equities on Tuesday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was 1.4% higher.

Sterling was at USD1.3232 on Tuesday morning, down from USD1.3247 at the London equities close on Monday. Against the euro, sterling rose to EUR1.1604 from EUR1.1597.

The euro was lower at USD1.1399 from USD1.1422. Against the yen, the dollar advanced to JPY162.35 from JPY161.93.

Investors were watching the yen amid speculation the Japanese government could intervene in currency markets as the yen hit its weakest level against the dollar since 1986.

The move comes amid expectations that the Federal Reserve will lift interest rates this year, ahead of US jobs data on Thursday which could add to these expectations.

ING analysts said: "While 162 is widely seen as another 'line in the sand' (marking the 2024 high), Tokyo may prefer to hold off intervention until Friday's US holiday-thinned market conditions. At the same time, the market will have already had a chance to react to both comments from [Fed Chair Kevin] Warsh on Wednesday and Thursday's US jobs report."

Meanwhile, UK Prime Minister Keir Starmer said the UK had to be prepared for war to be able to deter potential enemies as he set out the £15 billion defence investment plan, PA reported.

The prime minister acknowledged some other areas of government spending would be slashed in order to fund defence, with road and energy projects scrapped to pay for the military.

Starmer said: "When the world is arming and aggression is rising, the best way to avoid war is to prepare for it.The best way to defend is to deter, to have the strength to make your adversaries think again before they act. And that is what we are doing."

Annual defence spending will increase from £54 billion when Labour came to power to £80 billion by 2029, Starmer said.

Chancellor Rachel Reeves said the extra money for the Dip had come from "reprioritising spending" across government.

Defence stocks were higher as Babcock International rose 3.2%, Rolls-Royce was 2.6% higher and Melrose advanced 2.3%. BAE Systems shares were up 1.8%.

Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index 0.1% higher, and the Nasdaq Composite to rise 0.2%.

The yield on the US 10-year Treasury was quoted at 4.37% on Tuesday morning, slimmed slightly from 4.39% on Monday. The yield on the US 30-year Treasury narrowed a little to 4.85% from 4.86%.

Back in London, Shell shares were up 0.5% after Bloomberg reported that it is nearing the sale of its fuel stations in South Africa to a unit of Abu Dhabi National Oil for around USD1 billion.

Shell and the retail arm of Abu Dhabi National Oil are preparing to announce a deal in the coming days, Bloomberg reported. The deal would give Adnoc control over 600 retail fuel outlets in South Africa, or around 10% of the market.

Talks are advanced and no final agreement has been reached, Bloomberg added.

Burberry shares were 1.8% lower due to negative read-across from peer Kering, which fell 5.4% in Paris.

Fashion-focused investigative publication Glitz reported on "Balenciaga's alarming financial situation". Kering does not release individual results for its units, including Balenciaga, Glitz noted.

However, Glitz said it has learned Balenciaga suffered losses of EUR164 million in 2025.

On the FTSE 250, shares in Saga were up 6.3% and led the FTSE 250 index, despite trading as much as 11% lower earlier in the day.

The London-based provider of products and services for people over 50 maintained its guidance as it reported strong trade in its Travel unit.

It said it traded in line with expectations in the period to June 29, the early stretch of its current financial year. The company said it is on track to "deliver its full year guidance".

In the period to June 29, Travel continued "to trade strongly" as the cruise offering beat expectations, Saga said on Tuesday.

"Trading in Insurance Broking remains in line with expectations and the start of our long-term relationship with Ageas is progressing well," Saga said. "New business, for both motor and home, is now live with Ageas and renewals are expected to follow later this year."

On the AIM index, shares in ADM Energy were down 41%.

The West-Africa focused natural resource investor said there has been a delay in finalising its accounts so it will not meet today's deadline for its 2025 figures.

It is now targeting the publication of its 2025 results before the end of August. Trading in ADM's shares on AIM will be suspended on Wednesday, pending publication of the accounts.

Brent crude was trading higher at USD73.94 a barrel on Tuesday morning from USD72.85 on Monday.

Gold was slightly higher at USD4,029.12 an ounce early on Tuesday from USD4,023.68 late Monday.

Still to come on Tuesday's economic calendar is inflation data for Germany, plus US Jolts figures, as well as data from the US house price index and the Chicago purchasing managers' index.

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