London midday: FTSE pares gains but defence firms rally
By Michele Maatouk
Date: Monday 01 Sep 2025
(Sharecast News) - London stocks had pared earlier gains to trade just a touch higher by midday on Monday, with defence firms and precious metals miners lending a hand.
The FTSE 100 was up 0.1% at 9,196.87, with the session expected to be fairly quiet as US markets will be closed for Labor Day.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Energy names are under mild pressure as oil prices extend their slide, while housebuilders could stay in focus after soft Nationwide data hinted at affordability strains. With few domestic catalysts, attention turns to central bank signals later this week to set the tone for the month ahead.
"US markets are closed for Labor Day, but headlines are anything but quiet. A federal appeals court ruled Trump's global tariffs illegal, setting up a Supreme Court showdown before they expire in mid-October - injecting fresh uncertainty into trade policy. That backdrop, coupled with rising bets on a Fed rate cut later this month, has gold glistening near record highs as investors seek safety. All eyes now turn to this week's labour data, which could shape the size of the Fed's next move."
On home shores, a survey showed the downturn in the manufacturing sector continued in August.
The S&P Global manufacturing purchasing managers' index fell to 47.0 from July's six-month high of 48.0. It was below the 50 mark that separates contraction from expansion for the eleventh month in a row.
The main factor underlying manufacturing sector weakness was a slump in new work intakes. New orders contracted at the fastest pace in four months and to one of the greatest extents seen over the past two years.
Lower new work inflows were put down to subdued client confidence, cost caution following the increases to minimum wages and employer NICs and tariff uncertainties.
Rob Dobson, director at S&P Global Market Intelligence, said: "Production volumes are still showing resilience in the face of global geopolitical uncertainty and US tariff policies, with both July and August having seen only slight contractions that were milder than those suffered earlier in the year. Business confidence has also lifted to a six-month high, reflecting hopes that the trading environment is starting to settle down.
"However, August also saw a steep drop in UK manufacturers' new orders, with total order books and overseas demand both falling at some of the fastest rates seen over the past two years. Weak market conditions, US tariffs and downbeat client confidence all contributed to the dearth of new contract wins. Job cuts were also reported for a tenth successive month, with factory headcounts dropping to one of the greatest extents post pandemic.
"The outlook for the sector therefore clearly remains very uncertain. With manufacturers fearing that possible government policy decisions, including potential tax increases, could further hurt their competitiveness in domestic and export markets, the upcoming Budget will likely prove very important in guiding business confidence about the year ahead."
Investors were also mulling the latest monthly Money and Credit report from the Bank of England, which showed that mortgage approvals for house purchases ticked up by 800 to 65,400 in July.
Net borrowing of mortgage debt fell by £0.9bn to £4.5bn in July, compared to a £3.2 billion increase of net borrowing to £5.4bn in June.
The 'effective' interest rate - the actual interest paid - on newly drawn mortgages fell for the fifth month in a row, to 4.28% in July from 4.34% the month before. However, the rate on the outstanding stock of mortgages remained at 3.88%.
The report also showed that net borrowing of consumer credit by individuals edged up to £1.6bn from £1.5bn. Within that, net borrowing through credit cards increased to £0.8bn in July from £0.7bn in June.
Net borrowing through other forms of consumer credit such as car dealership finance and personal loans rose to £0.9bn from £0.7bn.
The latest survey from Nationwide was also in focus, as it revealed a slowdown in annual house price growth.
Elsewhere, a survey from the Confederation of British Industry showed that private sector firms across all major sectors in the UK expect economic activity to weaken in the coming quarter.
In equity markets, defence names Babcock, Rolls-Royce and BAE Systems all gained after the UK secured a £10bn deal to supply Norway with at least five new warships. The deal supports 2,000 jobs at BAE Systems' shipyards in Glasgow and a further 2,000 roles across the UK maritime supply chain until the late 2030s, the government said.
Precious metals miners Fresnilo, Endeavour and Hochschild shone as gold prices neared a record high, while silver hit a 14-year high.
Kainos surged as it said revenues for the year ending 31 March 2026 were set to be at the upper end of consensus forecasts, driven by stronger sales in the period.
Domino's Pizza rallied after it announced a £20m share buyback as it takes advantage of a big plunge in its share price over recent weeks. It also said that full-year expectations remain unchanged, though net debt is now expected to be higher than previously expected.
Genuit reversed earlier losses to trade up after announcing the acquisition of Monodraught - a provider of commercial ventilation solutions in the UK - for £55.6m.
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