Daily market update: oil prices, BAE Systems, Glencore, motor finance

The FTSE 100 made new record highs above 10,600 as inflation dropped more sharply than expected to a 10-month low.

This increases the chances of an interest rate cut when the Bank of England meets next month – which is typically good news for stocks and shares in general. It is also a positive for the FTSE 100 given the likely knock-on effect on the pound.

Lower rates typically translate into weaker sterling which, in turn, flatters the overseas earnings which dominate the index.

Mining, energy and defence firms were all in demand in early trading after results from Glencore and BAE Systems. Oil prices were higher as Trump rattled the sabres on Iran amid ongoing negotiations between Tehran and Washington over the former’s nuclear programme.

Later on, attention will be centred on the minutes of the latest meeting of the Federal Reserve as investors weigh the possible trajectory of rates across the Atlantic.

BAE Systems

BAE Systems has reaped the benefits of greater defence spending around the world, with full-year results showing a chunky increase in sales, underlying earnings and dividends.

BAE is highly experienced and a trusted name in the defence space, valuable attributes that put it in a prime position to win contracts. While it is a major cog in the UK’s defence wheel, it isn’t solely reliant on its home territory to grow earnings. BAE is an international business, and this diversification works to its advantage.

BAE benefits from having fingers in many pies. In addition to air, land and sea defence, it is increasingly involved in technologies for electronic warfare and space-based security. These are tomorrow’s defence hotspots, and innovation is paramount.  

It is ploughing big money into research and development to stay abreast of technological advancements and the need for more sophisticated products and services. While that has pulled down free cash flow year-on-year, reinvesting in a business is essential to stay one step ahead of the competition. Free cash flow is the cash generated from operations minus the costs of running the business and capital expenditure.

Glencore

The latest numbers from Glencore are not as strong as some of its peer group but they’re also not as weak as the market expected. That’s enough to buoy the company as it emerges from its recent flirtation with Rio Tinto over a merger.

Glencore’s second-half recovery may not rival Liverpool’s turnaround in Istanbul two decades ago, but the latter part of the year did represent a significant improvement – driven by strong metal prices and higher copper output.

Like most of its peers, Glencore sees copper as the route to growth thanks to the role the metal is playing in AI data centres, renewable energy, and electric vehicle infrastructure. Building greater scale in copper production was a key driver behind the talks over a combination with Rio Tinto.

Glencore benefits from its large commodities trading operation which means it can participate from mine to market and enjoy somewhat less volatile earnings than its counterparts.

The factor holding it back in 2025 was exposure to falling coal prices. The decision to retain its coal assets in 2024, when many of its peers were going the other way, attracted controversy for ESG reasons.

Investors may now be questioning the business logic of the decision thanks to unhelpful supply and demand dynamics, as traditionally rapacious consumers of the fossil fuel like India and China switch to renewables.

Motor finance

While it has not rivalled the impact of PPI claims, the motor finance mis-selling scandal has still dogged the UK finance and automotive sectors over recent years.

Reports suggest the FCA is going to partially walk back its tough stance on the issue – particularly when it comes to in-house lenders at car manufacturers. In many cases customers will have been offered deals by these lenders at attractive rates as an incentive to buy their vehicles.

The regulator might not go fully into reverse – there is still a significant tab to be picked up by the industry. However, with carmakers and lenders already making significant provisions and the regulatory backdrop appearing to soften, this issue looks increasingly containable.