The FTSE 100 index saw a positive close on Friday, with a rise of 43.91 points, or 0.4%, ending the day at 10,446.35. This uptick follows the release of US consumer inflation data that came in lower than anticipated, providing a boost to stock prices across London. Additionally, news of a significant investment in military capabilities by the UK government fueled gains in defence-related stocks.
US Inflation Slows, Impacting Global Markets
The latest figures from the US revealed that the annual Consumer Price Index (CPI) rate slowed to 2.4% in January, down from 2.7% in December. This marked a more significant decline than analysts had predicted, with expectations set at a softer deceleration to 2.5%. Month-on-month, consumer prices increased by 0.2%, falling short of the 0.3% increase forecasted.
The core index, which excludes volatile food and energy prices, rose by 2.5%, aligning with expectations but down from 2.6% the previous month. These developments suggest a cooling inflation trend, which is likely to influence monetary policy discussions in the US and beyond.
UK Defence Spending Announcement
In a significant move, Defence Secretary John Healey announced an allocation of £400 million for the development of long-range missiles this year, aimed at enhancing European security. This funding will support the replacement of the Storm Shadow missile and contribute to the Stratus “stealth” missile project in collaboration with France and Italy, as well as the Deep Precision Strike system developed with Germany.
Healey is expected to elaborate on these initiatives during the Munich Security Conference, highlighting further industrial cooperation with European allies. The announcement has already spurred a rise in defence stocks, with Melrose Industries up 3.7%, Rolls-Royce gaining 3.6%, and BAE Systems climbing 2.2%.
Market Movements and Notable Stock Performances
The FTSE 250 index also closed positively, increasing by 122.28 points, or 0.5%, to finish at 23,427.27. Meanwhile, the AIM All-Share saw a modest rise of 0.69 points, closing at 811.85. Despite the overall market gains, NatWest saw a decline of 4.1%, closing at 570.60p, despite reporting strong annual results. The bank’s total income for 2025 reached £16.64 billion, surpassing analyst expectations.
In contrast, EPE Special Opportunities on AIM surged by 9.8% following its announcement of a £3.0 million share buyback programme. Conversely, Tern faced a setback, falling 10% after proposing an open offer to raise £384,408 through the issuance of new shares at a considerable discount.
Currency and Commodity Updates
The pound was trading at 1.3626 dollars at the close of London markets, a slight decrease from 1.3628 on Thursday. The euro remained stable against the dollar at 1.1868. In commodity markets, Brent crude oil was priced at 67.48 dollars per barrel, down from 68.08 dollars late the previous day.
Across the Atlantic, US stocks also reflected a positive trajectory, with the Dow Jones Industrial Average and S&P 500 both up 0.3%. The yields on US Treasuries showed a slight narrowing, with the 10-year yield at 4.06% and the 30-year yield at 4.70%.
Why it Matters
The FTSE 100’s performance today underscores the interconnectedness of global markets, particularly in how US economic indicators can influence investor sentiment in the UK. Furthermore, the UK’s commitment to enhancing its military capabilities signals a strategic pivot towards greater defence readiness in an increasingly complex geopolitical landscape. This move not only impacts defence stocks but also reflects broader trends in international security cooperation, which could have lasting implications for investment in the sector.