After weeks of being knocked around by the US-Iran conflict and its effect on global oil flows, the FTSE 100 has managed to piece together a recovery of sorts, and the clearest beneficiaries have been the defence stocks.
Babcock secured a six-month bridging extension to its naval support contract with the Ministry of Defence, covering the period while negotiations on a longer-term deal continue. The market responded warmly, with Babcock and Rolls-Royce leading the index higher on 1 April as the FTSE 100 climbed 1.7% to a two-week high.
BAE Systems got an additional boost after Prime Minister Keir Starmer confirmed Britain would purchase at least 12 F-35 stealth jets capable of carrying nuclear warheads – the country’s most significant nuclear capability upgrade in decades – with BAE supplying a substantial portion of the components.
The broader mood has been lifted by tentative signs that the Strait of Hormuz situation may be inching towards some kind of diplomatic management. Foreign Secretary Yvette Cooper chaired a virtual meeting of around 35 nations on Thursday to explore restoring freedom of navigation, while Iran confirmed it was drafting a traffic protocol with Oman.
The FTSE 100 closed up 0.6% on Thursday, with both the main index and the FTSE 250 logging weekly gains in a shortened pre-Easter week.
Not everyone had reason to celebrate. Berkeley Group warned that profits would be substantially lower over the next four years, sending its shares sharply lower, as it adjusts to a weaker housing market and rising regulatory pressures.
Rightmove had a difficult session after reports of a £1.5 billion legal claim filed at the Competition Appeal Tribunal, with estate agents accusing the property portal of charging unsustainable fees – some claiming their costs had more than doubled in recent years. The shares have already fallen around 50% since last August, though several directors have been buying stock recently, suggesting those closest to the business see the selloff as overdone.
Oil prices have stubbornly held above $100 a barrel, a reminder that the physical disruption to around a fifth of global supply has not gone away. BP and Shell remain caught in the crossfire, lifted on ceasefire hopes and dragged back when those hopes fade.
With markets closed Friday and Monday for Easter, investors head into the long weekend cautiously optimistic, though few are willing to call the all-clear just yet.