25th Feb 2025 17:01
(Alliance News) - The FTSE 100 closed in positive territory on Tuesday, although well off early highs, as a marked drop in US consumer confidence knocked Wall Street.
The FTSE 100 index closed up 9.69 points, 0.1%, at 8,668.67. The FTSE 250 ended down 36.11 points, 0.2%, at 20,448.28, while the AIM All-Share closed down 2.82 points, 0.4%, at 708.06.
The Cboe UK 100 ended up 0.1% at 867.14, the Cboe UK 250 closed down 0.1% at 17,801.80, while the Cboe Small Companies rose 0.3% at 15,857.43.
In London, Keir Starmer said spending on defence in the UK would rise from its current 2.3% share of the economy to 2.5% in 2027.
That will mean spending GBP13.4 billion more every year from 2027, something which Starmer acknowledged required "extremely difficult and painful choices".
He said he wanted that figure to reach 3% of gross domestic product during the next parliament.
Starmer said the plan amounted to "the biggest sustained increase in defence spending since the end of the Cold War".
Shares in defence manufacturer BAE Systems rose 4.2%, while Babcock International and Qinetiq climbed 1.1% and 1.3% respectively.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.5%, while the DAX 40 in Frankfurt fell 0.1%.
US financial markets were lower at the time of the London close. The DJIA was down 0.3%, the S&P 500 was 1.1% lower, and the Nasdaq Composite declined 2.1%.
Tesla slumped 9.3% after weak European car sales, Nvidia fell 3.3% ahead of earnings Wednesday, while Amazon also slid 3.3%.
Technology stocks have been a weak feature in recent sessions, falling 5.5% in the last five days.
The declines saw Scottish Mortgage Investment Trust, which invests in leading US tech names, drop 3.2% in London.
Kathleen Brooks at XTB Research said the "once mighty tech sector in the US is no more."
In the S&P 500, there is no longer a clear bias for tech stocks, she added, noting from a sector perspective, the semiconductor index has fallen from its top spot.
"The best performing sectors in 2025 include transport, tobacco, healthcare and gold, tech is conspicuous by its absence," she added.
Brooks cited Deepseek, lower US defence budgets and stretched valuations as three key reasons for the current demise.
"Overall, valuations are weighing on tech this year, as the stock market rally broadens out in the US and elsewhere. This is bad news for tech and is a harder challenge for it to overcome, in our view. While Nvidia has an elevated PE ratio compared to other sectors in the market, its valuation is reasonable compared to other US tech giants. Eventually, the tech sector’s valuation could decline to levels that may entice buyers, but that could take some time. For now, we do not expect tech to move as a unit, and we expect investors to treat each company on its own merits."
The latest US falls came as figures showed US consumer confidence fell this month by the most since August 2021 on concerns about the outlook for the broader economy.
The Conference Board’s gauge of confidence decreased 7 points in February to 98.3, the third straight decline, data released Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 102.5.
A measure of expectations for the next six months also fell by the most in three-and-a-half years, while a gauge of present conditions declined more modestly.
Samuel Tombs at Pantheon Macroeconomics noted the survey mirrors the Michigan survey in showing that consumers’ confidence has deteriorated sharply in the face of threats to impose large tariffs and to slash federal spending and employment.
The headline index now is 11.3 points lower than in October, and 13.3 points lower than in January 2017, shortly after Trump first took office, he added.
The weakness of confidence strongly suggests that recent rapid growth in spending on durable goods mostly reflects households pre-empting tariffs, Tombs suggested.
Tombs thinks the Federal Open Market Committee likely will be troubled by the further increase in median one-year ahead inflation expectations, but he expects a weakening labour market to prevent elevated inflation expectations from influencing wage growth.
The weak data saw bonds rise and the dollar fall. The yield on the US 10-year gilt dropped 11 basis points to 4.30%. In London, the yield on the 10-year gilt fell 7 basis points to 4.50%.
The pound was quoted at USD1.2653 at the London equities close Tuesday, higher than USD1.2634 at the close on Monday. The euro rose to USD1.0501 against USD1.0471.
Against the yen, the dollar was trading lower at JPY148.84 compared with JPY149.64 late Monday.
On London's FTSE 100, Smith & Nephew gained 5.5% after impressing analysts with beats across the board, laying solid foundations for the year ahead.
The Watford, England-based medical equipment manufacturing company said pretax profit leapt 72% to USD498 million in 2024 from USD290 million in 2023. Diluted earnings per share increased 56% to 47.0 US cents from USD30.1 cents. Trading profit increased by 8.2% to USD1.05 billion from USD970 million.
Revenue rose 4.7% to USD5.81 billion in 2024 from USD5.55 billion in 2023. In the fourth quarter alone, revenue increased 7.8% to USD1.57 billion from USD1.46 billion, beating market consensus of USD1.54 billion.
Bank of America said S&N's full-year revenue was 1% ahead of market consensus and profit 2% ahead. In the fourth quarter, organic revenue growth of 8.3% was better than the 5.5% market consensus, despite the headwinds in China, highlighting the "extremely strong" underlying business momentum across other geographies.
UBS pointed out growth was so strong in the fourth quarter that S&N actually met its original 2024 guidance, which it had cut in late October.
Banks also gave the FTSE 100 a lift, with NatWest up 2.2%, HSBC up 2.8% and Lloyds Banking Group up 1.9%.
But Unilever fell 1.3% after the unexpected departure of Chief Executive Officer Hein Schumacher.
Unilever said Schumacher, who joined in July 2023, is stepping down "by mutual agreement". He will be replaced by Chief Financial Officer Fernando Fernandez.
James Edwardes Jones at RBC Capital Markets said that having spoken to Unilever, the departure is being presented in a 'business as usual' light, the board has been thinking along these lines for a while and this is the culmination.
"We wonder whether this is a victory for those Unilever insiders who resented the appointment of an external CEO, and evidence of the old - and often dysfunctional - Unilever culture reasserting itself," he added.
UBS said its understanding is that the decision is driven by the board's willingness to "accelerate the pace of change" at Unilever, while remaining fully committed to the current strategy.
Barclays supported the change.
"We view it as a hard-nosed decision by the board about who is the best person going forward into the next stage of its evolution," the broker said.
"In committing to Fernandez as CEO, we suspect it could prove to be an astute decision for the long-term benefit of Unilever's shareholders. Whilst Hein's experience was in foods, remember Fernandez's background is more Home and Personal Care (this is Unilever's future)," Barclays explained.
Fresnillo and Endeavour Mining fell 2.5% and 3.3% respectively as the gold price tumbled.
Gold was quoted lower at USD2,895.74 an ounce at the London equities close on Tuesday against USD2,942.87 at the close on Monday.
Brent oil was quoted at USD72.86 a barrel at the London equities close on Tuesday, down from USD74.85 late Monday.
Wednesday's UK corporate calendar has full-year results from Hikma Pharmaceuticals and Aston Martin Lagonda.
Wednesday's global economic calendar has Australian CPI figures overnight, consumer confidence data in France and Germany and US new home sales numbers.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2025 Alliance News Ltd. All Rights Reserved.