London's prominent FTSE 100 index made a notable comeback on Monday, closing 0.70% higher. This uptick followed proactive discussions led by UK Prime Minister Keir Starmer with European leaders about enhancing defense support for Ukraine amidst its ongoing conflict with Russia. As geopolitical tensions continue to shape market sentiments, British aerospace and defense giants, BAE Systems and Rolls-Royce Holdings, stood out as the major gainers on the FTSE 100, posting impressive increases of 14.58% and 4.41% respectively.
These surges were driven by growing anticipations of escalated defense expenditure. Furthermore, BofA Global Research recently updated its outlook on Rolls Royce, lifting its price target significantly—a move that reflects confidence in the company’s trajectory. Analysts revised the target from 8.3 pounds to 11.5 pounds, indicating a remarkable upside of 57.2%.
This adjustment aligns with the company's strategic plans, including the announcement of a 1 billion-pound-sterling share buyback, which is expected to fortify investor sentiment and stabilize stock performance. Conversely, the market wasn’t without its losses, as the distribution and outsourcing firm Bunzl experienced the most significant decline on the index, shedding 8.79%.
This downturn corresponded with a dip in profit attributable to equity holders for the fiscal year ending December 31, 2024, which fell to 500.4 million pounds from 526.2 million pounds, reflecting pressures from reduced revenue streams. On a broader economic scale, the final S&P Global UK Manufacturing PMI registered at a concerning 14-month low of 46.9 in February, compared to 48.3 in January and slightly above the initial flash estimate of 46.4.
The data highlights the escalating challenges facing UK manufacturers, with S&P Global Market Intelligence director Rob Dobson emphasizing the increasingly tough trading conditions. He noted that weak demand, low client confidence, and rising cost pressures are exacerbating declines in output and new orders.
Additionally, changes from the Autumn Budget regarding the national minimum wage and employer National Insurance Contributions (NICs) are fuelling inflation concerns and further deepening the trend of diminishing workforce numbers..