The FTSE 100 approached an all-time high on Wednesday as London’s defence shares helped the index shake off ongoing tat-for-tit US/China trade negotiations.
At 8,811, London’s leading index was less than 1% away from all-time closing highs at 8,871 at the time of writing.
“UK markets have made another step in the right direction this morning, albeit a small one. The FTSE 100 opened a smidge higher, as investors look eager to shrug off US trade drama. It’s perhaps a signal that markets have moved on from reacting to every new development,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
Although it’s too early to dismiss Trump’s trade war as noise, UK markets have certainly taken recent developments in their stride and found positive stories closer to home. Even US markets are taking less and less notice of Trump’s trade policies.
While the need to increase defence spending shouldn’t be seen as a positive, investors in defence stocks are feeling the benefits of the UK’s plans to boost defence spending. Babcock was back at the top of the FTSE 100 leaderboard as optimism around the defence contractor built amid the plans to bolster our submarine fleet. Babcock shares are now 110% higher in 2025.
A strong showing from miners Antofagasta and Glencore helped support the index, which was surprising given deteriorating Chinese data and further headlines about a US/China trade deal.
“All eyes are on China given it is currently the biggest loser from Trump’s new trade policy, and it looks like we’re still some way off from a deal between the two countries, AJ Bell’s Russ Mould explained.
“Trump made comments on social media that imply China’s President Xi Jinping is a tough cookie with regards to making a deal. A potential stalemate situation means uncertainty prevails on the markets and asset prices remain volatile.”
The stalemate Mould mentions is, of course, a concern, but traders are preferring to sit back and hope the ‘TACO’ trade continues.
There is a risk of complacency creeping into markets with the very real threat of an economic slowdown due to Trump’s tariffs not going away. For now, at least, traders are happy to digest data as it’s released.