The defensive lean to London’s FTSE 100 index served it well on Tuesday, as tensions mounted in the Middle East amid reports that Iran is planning an imminent missile attack on Israel.
The FTSE 100 index ended up 39.70 points, 0.5%, at 8,276.65. The FTSE 250 closed 112.46 lower, 0.5%, at 20,940.73, and the AIM All-Share shed 3.63 points, 0.5%, at 736.80.
The Cboe UK 100 ended 0.5% higher at 828.74 on Monday. The Cboe UK 250 fell 0.5% to 18,419.23, and the Cboe Small Companies slid 0.4% to 16,799.65.
In European equities on Tuesday, the CAC 40 in Paris declined 0.8%, while the DAX 40 in Frankfurt ended down 0.7%.
In New York at the time of the London market close, the DJIA was down 0.4%, the S&P 500 was 1.0% lower while the Nasdaq Composite declined 1.8%.
Equity markets were knocked back mid-afternoon as the US warned that Iran was preparing an imminent missile attack on Israel.
The US has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel,‘ a senior White House official told AFP.
‘We are actively supporting defensive preparations to defend Israel against this attack,’ the official said in a statement, warning that such an action ‘will carry severe consequences for Iran.’
Following the warning, the Israeli military said it had not detected the same threat so far.
‘At this moment, we do not detect any aerial threat launched from Iran,’ said military spokesman Rear Admiral Daniel Hagari.
‘We are on high alert alongside our partners in the US, our ally, and are closely monitoring developments in Iran.’
But London’s blue-chip outperformed as a spike in the oil price lifted index heavyweights BP and Shell.
Brent oil was quoted at $74.51 a barrel late on Tuesday afternoon in London, up from $72.30 late Monday.
BP rose 2.2% as did industry peer Shell.
Defence manufacturer BAE Systems, already a beneficiary of bumper growth in defence budgets in recent years, rose 2.2%. In Frankfurt, automotive and arms manufacturer Rheinmetall jumped 5.1%.
But airlines suffered with British Airways owner, IAG falling 1.6% and easyJet dipping 3.5%. In Paris, Air France KLM nosedived 7.3%.
A jump in the gold price supported Fresnillo, up 2.9%, and Endeavour Mining, up 1.5%.
Gold climbed to $2,660.31 an ounce against $2,633.76 on Monday.
Meanwhile, the dollar gained ground. The pound was quoted at $1.3276 at the time of the London equities close, down sharply compared to $1.3397 on Monday. The euro stood at $1.1064, down against $1.1142. Against the yen, the dollar was trading at JP¥143.87, up compared to JP¥143.31.
Further knocking sentiment, figures showed the US manufacturing sector remained depressed, with new orders falling and job losses picking up.
The seasonally adjusted S&P Global US manufacturing purchasing manager’‘ index remained below the 50.0 no-change mark in September, dipping to 47.3 from 47.9 in August.
The index signalled a third consecutive monthly worsening in the health of the sector, and one that was the most pronounced since June. Although lower, it was better than the 47.0 flash estimate.
With the US Federal Reserve casting a wary eye on the health of the labour market, the survey showed employment decreased at the strongest pace since the start of 2010 if the Covid-19 pandemic period is excluded.
Meanwhile, the ISM’s report on business said economic activity in the sector contracted in September for the sixth consecutive month and the 22nd time in the last 23 months.
The manufacturing PMI registered 47.2 in September, matching the figure recorded in August. An improvement to 47.5 had been expected, according to FXStreet consensus.
The employment index registered 43.9 down from August’s figure of 46.
‘The fall in the employment index was disappointing and raises the prospect of a further loosening of the labour market, though September‘s employment report will be a more important factor in determining whether the Fed cuts rates by another 50bp at its next meeting in November,’ said analysts at Capital Economics.
However, Capital Economics felt it could have been worse.
‘Overall, the survey data hint at a less negative outlook for the manufacturing sector than recent releases, though ongoing strikes at Boeing and ports along the East and Gulf Coasts, as well as disruption from Hurricane Helene, may have a negative influence on October’s headline figure.’
In more positive news, figures from the US Bureau of Labor Statistics showed job vacancies rose more than expected in August.
There were 8.0 million job vacancies in August, up from 7.7 million in July. Economists had expected the figure to remain flat.
There was also better news in the UK.
According to S&P Global, the seasonally adjusted S&P Global UK manufacturing purchasing managers’ index posted 51.5 points in September, unchanged from the earlier flash estimate. This was down from its 26-month high of 52.5 in August, but was nevertheless above the neutral 50 mark for the fifth month running.
As S&P Global Market Intelligence Director Rob Dobson put it: ‘The UK manufacturing sector is still expanding at a solid, albeit slightly slower, pace.’
But the eurozone ‘slid deeper in contraction’ in September, the manufacturing PMI edging down to a nine-month low in September of 45.0 from 45.8 in August.
The HCOB eurozone manufacturing PMI output index also slid to a nine-month low of 44.9 in September, from 45.8 the prior month.
Elsewhere on London’s FTSE 100, WPP gained 2.3% after the company’s Mindshare won business with Unilever after the consumer good firm’s ‘media agency review’.
Analysts at Citi said the news will come as a ‘great relief’ for WPP shareholders.
‘It doesn‘t necessarily mean that the group is set to see a huge acceleration in growth in 2025 but it does mean that the headwind from account losses should moderate.’
But 3i remained on offer, down 2.4%, after Monday’s report that it was being targeted by a short seller.
The Times claimed short-seller ShadowFall Capital and Research has taken out a multimillion-pound bet against the private equity group on the basis that the star company in its portfolio, the European discount retail chain Action, is significantly overvalued.
ShadowFall believes 3i’s investors have failed to appreciate the extent to which Action‘s margins have been boosted by inflation, which is now receding, the report said.
Mulberry leapt 8.1% after rejecting the takeover approach from Mike Ashley’s Frasers Group after receiving the backing from its majority shareholder.
Bath, England-based Mulberry, famous for its handbags, said the possible offer from the Sports Direct store chain owner ‘does not recognise the company’s substantial future potential value’.
Mulberry said it had the support of majority shareholder, Challice Ltd, which holds 56.1% of the firm. Frasers has 36.8%.
Sausage roll seller Greggs declined 6.1%.
The firm reported a double-digit sales increase in the third quarter, although the pace of growth slowed from the pace set in the first half.
The Newcastle, England-based bakery chain said total sales rose 11% for the 13 weeks to September 28, and 13% year-to-date. This compares to an increase of 14% reported in the 26 weeks to July 1.
Company-managed shop like-for-like sales rose 5.0% for the quarter and 6.5% year-to-date, slowing from 7.4% at the half-year stage.
Panmure Liberum downgraded its rating to ’hold’ from ’buy’ on valuation grounds feeling the share price is ‘up with events’.
The broker noted the shares have done well outperforming the FTSE 350 by around 16% year-to-date – ‘deservedly so’.
Wednesday’s UK corporate calendar sees half-year results from sports retailer JD Sports Fashion.
The economic calendar on Wednesday has a raft of PMI readings, weekly jobless claims data in the US plus ADP private payrolls.
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