LONDON (ShareCast) - (Sharecast News) - The FTSE 350 started the month of September on a down note with Defence issues weakest as analysts acted on the sector's lofty valuation.


Defence stocks dropped after analysts at Bank of America highlighted how EU Defence stocks were now trading at a 47% premium relative to the Stoxx Europe 600.

In general, they believed that it was time to be "selective" in Defence with limited scope left for the sector to re-rate.

For Rolls-Royce on the other hand they did see "significant" room for a re-rating.

The engine maker's shares were trading at an estimated 2026 free cash flow yield of 8%, against 4-5.5% at its aftermarket peers.

Nonetheless, the absence of many traders from their desks due to the Labor Day holiday in the States meant that taking any signal from Monday's price action was riskier than usual.

That said, investors were waiting on the August non-farm payrolls report due out on Friday which could easily roil markets were it to again come in weaker than expected.

IG chief market analyst Chris Beauchamp however believed that the US jobs data might in fact not be so gloomy.

"All eyes are on the payrolls report this week, but there is a limited likelihood that markets are in for another dire number," Beauchamp told clients.

"Instead, a higher revision to last month's figure could see the prospect of a US recession being pushed back once again."

JP Morgan's Mislav Matejka on the other hand thought that Defensive areas of the market, such as Utilities, Real Estate, Healthcare and Staples would continue to outperform, as they had over the past six months.

Matejka nevertheless stood by his 'overweight' recommendation for UK stocks.

On that note, Rightmove surged 27% following confirmation from Australia's REA Group that it was considering a potential cash and share offer for the UK property platform, boosting its entire sector.

Top performing sectors so far today

Real Estate Investment & Services 2,652.89 +14.93%

Household Goods & Home Construction 14,858.59 +1.30%

Telecommunications Service Providers 2,104.97 +0.98%

Real Estate Investment Trusts 2,366.67 +0.55%

Software & Computer Services 2,498.58 +0.55%

Bottom performing sectors so far today

Aerospace and Defence 11,070.93 -4.11%

Automobiles & Parts 1,033.55 -2.71%

Personal Goods 10,967.33 -1.94%

Leisure Goods 26,196.66 -1.27%

Precious Metals and Mining 10,010.88 -1.00%

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