The FTSE 100 closed higher on Thursday, gaining 49.07 points, or 0.5%, to reach 10,303.88, despite ongoing tensions in the Middle East and an interest rate increase by the European Central Bank. The FTSE 250 edged up 19.30 points, or 0.1%, to 22,970.64, while the AIM All-Share fell 1.42 points, or 0.2%, to 770.96.
AJ Bell investment director Russ Mould commented: "Despite continuing uncertainty about the fate of any peace deal in the Middle East, the FTSE 100 forged ahead on Thursday." The upward movement in equities occurred even as US President Donald Trump intensified rhetoric on the Middle East, vowing "very hard" strikes on Iran and threatening to target the country's key oil infrastructure. He promised "bigger, more powerful" attacks as he pushes Tehran to turn the increasingly nominal ceasefire into a permanent peace deal. However, oil traders remained unfazed by the latest escalation, with Brent crude for August delivery trading flat at $92.95 per barrel on Thursday, compared to $92.98 at the time of the London equities close on Wednesday.
European Markets and ECB Decision
In European equity markets, the CAC 40 in Paris ended up 0.5%, and the DAX 40 in Frankfurt closed 0.1% higher after the European Central Bank raised interest rates by 25 basis points, as expected. ECB President Christine Lagarde stated that the hike was a "unanimous decision without reservations." The ECB noted: "The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area." Lagarde affirmed that the rate decision was not an "insurance hike," calling it a "good monetary policy interest rate decision." ING analysts described the hike as "more of a symbolic move" to signal the ECB's "willingness and determination to avoid being too late" in its policy response, adding that it is unlikely to derail the eurozone economy.
The euro traded lower against the dollar, at $1.1522 on Thursday, down from $1.1556 on Wednesday. The ECB's rate decision precedes a busy week of monetary policy meetings, including interest rate decisions in the UK, US, Japan, and Australia.
UK Political Tensions and Defence Stocks
In London, political tensions emerged as Defence Secretary John Healey resigned, accusing Prime Minister Sir Keir Starmer of failing to adequately fund the Defence Investment Plan. Shares in defence manufacturers initially fell on the news but later recovered. BAE Systems closed up 0.1%, and Babcock International gained 1.4%.
The pound traded at $1.3342 on Thursday afternoon, down from $1.3397 on Wednesday. Against the euro, sterling eased to €1.1578 from €1.1593.
US Markets and Treasury Yields
In New York, the Dow Jones Industrial Average rose 0.6%, the S&P 500 gained 0.2%, and the Nasdaq Composite climbed 0.4%. The yield on the US 10-year Treasury eased to 4.52% from 4.53%, while the 30-year yield remained flat at 5.00%.
FTSE 100 Movers
On the FTSE 100, Asia-focused financials rallied after recent weakness tied to regulatory reforms in China. Standard Chartered rose 3.4%, Prudential gained 2.5%, and HSBC increased 2.2%. UBS reiterated a 'buy' rating on Prudential, stating that a "potential downside scenario is already priced in." However, Halma shares plunged 15% despite strong results, as guidance for its fast-growing photonics business fell short of optimistic expectations. In financial 2026, the Photonics business contributed around eight percentage points of organic revenue growth, implying a growth rate of 52% for the financial year, up from 37% the previous year. For financial 2027, Halma expects this growth to slow to 30%.
The biggest risers on the FTSE 100 were Standard Chartered (up 61.0p at 1,852.0p), Airtel Africa (up 9.2p at 356.4p), Prudential (up 23.4p at 949.6p), Anglo American (up 92.0p at 3,804.0p), and HSBC (up 28.4p at 1,321.8p). The biggest fallers were Halma (down 714.0p at 3,928.0p), Sage Group (down 44.6p at 805.6p), ICG (down 84.0p at 1,716.0p), Relx (down 86.0p at 2,462.0p), and Autotrader (down 14.8p at 454.1p).
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Friday's global economic calendar includes French and German CPI reports, as well as UK GDP and industrial production data. The local corporate calendar features half-year results from Jersey Electricity.
Contributed by Alliance News
