The FTSE 100 shrugged off AI-related selling on Wall Street and in Asia overnight to storm through 10,700 on Tuesday as defensive and financial names rallied.
London’s leading index was up 0.7% to 10,734 at the time of writing.
AI stocks were hit by fears that cheaper chip alternatives from Chinese firms could curtail demand for products from many of the names that led the AI rally this year.
“Worries about the cost of borrowing have sparked a fresh wobble of confidence, with tech companies sliding as investors brace for an era of higher interest rates amid growing competition in the sector,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“The tech-light nature of the Footsie is offering insulation from the sell-off, and the sun looks set to shine a little more brightly on retailers, given data out showing shoppers have been showing remarkable resilience amid high cost-pressures.”
The IMF’s positive assessment of the UK economy for this year may have also lifted spirits in London, but a warning of higher energy costs in 2027 will have kept enthusiasm in check.
It was slightly surprising to see the breadth of gains in London on Tuesday, given the selling elsewhere. Around 80 of the 100 constituents were higher at the time of writing.
Melrose Industries was the FTSE 100’s top riser, adding 3.7%.
There was a distinct interest in more traditional sectors, with financials and consumer staples in vogue. Airtel Africa, NatWest, Whitbread, Diageo and AstraZeneca were among the stocks that put in a solid session, helping lift the index.
BP was the standout corporate story with a trading update that revealed the extent of the benefit from higher oil prices in Q3.
“The sharp rise in oil and gas prices this year has created a major tailwind for BP’s earnings. The war in Iran has caused major disruption to the flow of refined energy products out of the Middle East, with the global supply situation exacerbated by damage to Russian refineries from Ukrainian drones,” explained Dan Coatsworth, head of markets at AJ Bell.
“Regular swings in energy prices since March have created the optimal backdrop for BP’s trading arm to enjoy bumper gains. Add these wins to higher selling prices for BP’s products and it’s no wonder the company has been able to rapidly pay down some of its debt.
“Against a backdrop of heightened volatility in the energy markets, BP has shown remarkable resilience with its upstream production and tightened its third quarter guidance with a higher bottom end and only a marginal narrowing of the top end.”