The FTSE 100 closed higher on Tuesday after new Chancellor John Healey pledged to maintain fiscal discipline, while defence and mining stocks led gains as investors responded positively to the new government’s economic direction.
The blue-chip index added 0.6% to finish at 10,585.91, with the FTSE 250 climbing 0.9%, extending gains across the wider London market.
Political developments remained in focus after Prime Minister Andy Burnham told ministers he intended to lead a “cost-of-living government” following the announcement of an £850 million electricity bill tax cut. Speaking at his first Cabinet meeting, Burnham said the government would always explain how its policies would be funded, while Healey described fiscal control as his “first duty” and the foundation of long-term economic stability.
Defence companies attracted buying interest following Healey’s appointment, with investors anticipating greater support for military spending. Babcock International rose 4.1%, while BAE Systems added 1.6%.
Mining shares also strengthened as commodity producers outperformed. Antofagasta climbed 5.8%, Fresnillo gained 4.4% and Endeavour Mining advanced 3.8%, providing further support for the FTSE 100.
Segro was among the day’s weakest performers, falling 3.4% after rejecting another takeover approach from US logistics property group Prologis.
The latest proposal offered 0.0890 new Prologis shares for each Segro share, valuing the company at 993p per share, or approximately £13.5 billion. Prologis argued the offer represented a 9.7% premium to Segro’s adjusted net asset value at the end of June, while also challenging what it described as unrealistic assumptions underpinning Segro’s valuation and earnings forecasts.
On the FTSE 250, Mitie surged 39% after agreeing to a recommended £3.1 billion takeover by facilities management rival OCS Group.
The cash offer values Mitie at 221.6p per share, comprising 218.5p in cash and a final dividend of up to 3.1p, representing a 45% premium to Monday’s closing price and valuing the company’s equity at around £3.1 billion.
Ocado rose 3.1% after securing an agreement to build a large automated customer fulfilment centre for an unnamed fast-growing European retailer. The facility is expected to begin operations during the 2028 financial year, although financial terms were not disclosed.
On AIM, IQE jumped 30% after upgrading its full-year revenue outlook following stronger-than-expected first-half trading. The semiconductor materials specialist expects first-half revenue of at least £64 million and now forecasts annual revenue growth of more than 30%, with adjusted EBITDA reaching the low-teen millions.
Chief executive Jutta Meier said demand across the company’s core markets remained strong, adding that its position in indium phosphide and other advanced material technologies continued to support future growth.
London Stock Exchange Group slipped 2.4% despite unveiling plans for LSE 24, a new weekday overnight trading service designed to give global investors greater access across time zones. The platform will operate between 17:00 and 07:50 each weekday, with a scheduled 30-minute pause for end-of-day processing.
Elsewhere in Europe, the CAC 40 gained 0.3% and Frankfurt’s DAX 40 rose 0.7%.
US markets also moved higher, led by technology stocks as investors looked ahead to another round of major earnings announcements. Optimism surrounding semiconductor companies helped outweigh concerns over fresh US tariffs on Canada and continued tensions in the Middle East, with Nvidia among the notable gainers after disclosing an investment in cloud infrastructure provider Nebius.