The FTSE 100 ended Thursday in positive territory as investors balanced an interest rate increase from the European Central Bank, political upheaval in Westminster and signs of a possible de-escalation in the Middle East.
London’s blue-chip index closed up 0.5% at 10,303.88, while the FTSE 250 added 0.1% to finish at 22,970.64.
Across Europe, sentiment remained broadly constructive with Paris’s CAC 40 rising 0.5% and Frankfurt’s DAX 40 edging 0.1% higher after the ECB delivered its first rate increase in almost three years.
The central bank raised interest rates by 25 basis points, a move widely anticipated by markets. ECB President Christine Lagarde described the decision as unanimous and insisted it was not intended as an “insurance hike”, arguing it reflected sound monetary policy as policymakers assessed inflation risks linked to the conflict in the Middle East.
Back in London, government divisions over defence spending moved into the spotlight after Defence Secretary John Healey resigned, accusing Prime Minister Keir Starmer and the Treasury of failing to provide sufficient funding for the long-delayed Defence Investment Plan.
Healey said in his resignation letter that the government had been unable to commit the resources needed at a time of increasing security threats. Defence stocks initially weakened on the news before recovering, with BAE Systems ending 0.1% higher and Babcock International gaining 1.4%.
Market sentiment received a further boost from the United States, where equities rallied sharply after President Donald Trump said planned military strikes against Iran had been cancelled and suggested negotiations between the two sides were advancing.
The Dow Jones Industrial Average surged more than 900 points, while the S&P 500 gained over 1.7%. Technology stocks led the move higher, pushing the Nasdaq Composite up 2.5%.
Among individual movers, Oracle fell 8% despite strong quarterly results as investors focused on margin pressures and increased capital spending plans. Intel climbed 5% after receiving a double upgrade to “buy” from Bank of America.
On the FTSE 100, Asia-focused financial stocks rebounded after recent weakness. Standard Chartered rose 3.4%, Prudential added 2.5% and HSBC gained 2.2%. UBS reiterated its buy recommendation on Prudential, arguing that a more pessimistic outcome already appears reflected in the share price.
Halma suffered the sharpest decline among blue-chip stocks, dropping 15% despite reporting strong results. Investors focused instead on slower expected growth at its photonics division, where management forecast expansion of around 30% in the current financial year, down from growth of 52% previously.
On AIM, Concurrent Technologies jumped 8.6% after securing a four-year contract worth around £17 million from a major European defence contractor. The order is the largest in the Colchester-based company’s history and comfortably exceeds its previous record contract secured last year.