The FTSE 100 rose in early trade on Wednesday as relief around the Middle East ceasefire continued for a second day, but the gains were small and were quickly sold into by traders.
London’s leading index was trading down 0.1% as oil prices recovered following steep losses yesterday.
Although sentiment received a boost from the Iran-Israel ceasefire, there was still a cautious tone to trade in London with the FTSE 100 failing to recover to levels around 8,900 recorded earlier this month.
The FTSE 100’s early rally looked less than convincing and gains turned to losses as the session progressed.
While the near-term risk of soaring oil prices has been squashed, the world still faces the risk of Donald Trump’s tariffs and the looming end of the 90-day pause on tariffs. Many countries are yet to arrange trade deals.
Interest rates are reentering the narrative after Fed Chair Powell suggested there was no reason to cut rates in July.
The cautious approach to stocks was demonstrated by a near 50/50 split in winners and losers on Wednesday. There was one standout performer in Babcock, whose carefully timed release of results coincided with NATO’s pledge to boost defence spending.
Babcock soared to the top of the FTSE 100 leaderboard after the defence contractor released a very strong set of preliminary results, hiking its dividend on the back of a sharp increase in operating profits.
Investors will also have been encouraged by commentary around plans for increased defence spending, a proportion of which will flow into Babcock’s coffers.
“Shares in defence and engineering contractor Babcock have more than doubled year to date so a positive set of results was needed for investors to sustain their enthusiasm,” said Russ Mould, investment director at AJ Bell.
“Largely that’s what they got – the numbers themselves were strong but so too was the accompanying rhetoric as the company talked about a ‘new era for defence’. A meaningful increase in medium-term guidance won’t have hurt either.
“Babcock, which plays a significant role supporting the UK’s nuclear submarine programme, announced an 11% increase in revenue and an eye-catching 50% increase in operating profit – albeit boosted in part by a one-off payout for a property disposal.”
WPP was the FTSE 100’s top faller after analysts at Barclays cut the stock to underweight.