The FTSE 100 (^FTSE) eked out marginal gains on Monday as advances in defence stocks helped offset nerves surrounding renewed US-China trade tensions.
The FTSE 100 index closed up 1.88 points at 8,774.26. The FTSE 250 (^FTMC) ended up just 0.96 of a point at 21,028.97, and the AIM All-Share closed up 1.45 points, 0.2%, at 748.13.
Defence stocks climbed as Prime Minister Keir Starmer said the government will increase defence spending to 2.5% of gross domestic product from April 2027 with an ambition – but no firm commitment – to increase it to 3% during the next parliament.
The Prime Minister said he was “100% confident” the plans in the new strategic defence review – including extra attack submarines, £15 billion on nuclear warheads and thousands of new long-range weapons – could be delivered on current funding plans.
On the FTSE 100, Babcock International (BAB.L) rose 8.3% while on the FTSE 250, Qinetiq (QQ.L) advanced 4.5%.
In European equities on Monday, the CAC 40 (^FCHI) in Paris fell 0.2%, while the DAX (^GDAXI) 40 in Frankfurt eased 0.3%.
European equities were held back by fresh developments in tariffs and renewed fears of a trade war between the US and China.
Late on Friday, US President Donald Trump doubled tariffs on imported steel and aluminium to 50%, starting this Wednesday.
At the same time, tensions with China resurfaced after Beijing rejected Mr Trump’s accusations of violating the Geneva truce struck earlier in May.
On Monday, China’s commerce ministry said it had upheld the deal. It accused Washington of introducing “a series of discriminatory and restrictive measures” in recent weeks that undermined the Geneva consensus and harmed “China’s legitimate rights and interests”.
Hani Abuagla, senior market analyst at XTB MENA, said although US Treasury Secretary Scott Bessent suggested that a call between Mr Trump and China’s President Xi Jinping may take place soon, markets remain wary of further escalation.
“The lack of clear progress risks reigniting trade volatility just as investors look for greater policy clarity,” Mr Abuagla added.
The latest twist in the trade war saga saw renewed falls for the dollar and gains for the euro and sterling.
The pound was quoted up at 1.3546 dollars late on Monday afternoon in London, compared with 1.3476 dollars at the equities close on Friday. The euro stood higher at 1.1429 dollars against 1.1348 dollars. Against the yen, the dollar was trading lower at 142.75 yen compared with 144.23 yen.
The yield on the US 10-year Treasury widened to 4.46% from 4.41% on Friday. The yield on the US 30-year Treasury stretched to 5.00% from 4.92%.
