8th Jan 2026 12:04
(Alliance News) - Stock prices in London were lower at midday on Thursday, despite a rise in defence stocks, as poorly-received updates from Tesco and AB Foods weighed on the FTSE 100.
The FTSE 100 index was down 19.15 points, 0.2%, at 10,029.06. The FTSE 250 was down 96.06 points, 0.4%, at 22,784.75, and the AIM All-Share was up 0.77 points, 0.1%, at 782.35.
The Cboe UK 100 was down 0.3% at 1,004.77, the Cboe UK 250 was down 0.4% at 19,859.67, and the Cboe Small Companies was down 0.3% at 17,880.99.
In European equities on Thursday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was 0.1% lower.
Sterling was at USD1.3447 at midday on Thursday, down from USD1.3472 at the London equities close on Wednesday. The euro was lower at USD1.1678 from USD1.1685. Against the yen, the dollar was marginally higher at JPY156.75 versus JPY156.74.
Defence stocks rallied on Thursday after US President Donald Trump said he wanted to increase the US defence budget by half next year to a giant USD1.5 trillion to deal with "troubled and dangerous times."
"I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be USD1 Trillion Dollars, but rather USD1.5 Trillion Dollars," Trump said on Truth Social.
"This will allow us to build the 'Dream Military' that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe," the president said.
Trump said the increase is possible due to revenue from the sweeping tariffs he has imposed since returning to office early last year.
The US is already by far the world's biggest military spender, and a hike to USD1.5 trillion would push Washington's financial outlay on its armed forces even farther ahead of its rivals China and Russia.
In response, shares in BAE Systems led the FTSE 100 and jumped 5.8%.
"The plethora of defence names on the UK stock market might have rallied, but it wasn't enough to stop the FTSE 100 from slipping back. The blue-chip index was dragged down by investor disappointment around updates from Shell, Tesco and Associated British Foods," noted AJ Bell analyst Russ Mould.
Meanwhile, industrial producer prices in the euro area rose at a faster pace in November, while unemployment edged lower on the month, according to data from Eurostat.
Industrial producer prices increased by 0.5% month-on-month in the euro area in November, accelerating from a 0.1% rise in October. The figure came above the 0.2% rise pencilled in by FXStreet.
Across the EU, producer prices climbed by 0.6% after a 0.1% increase the month before.
On an annual basis, however, producer prices remained in deflationary territory. Compared with November 2024, industrial producer prices were down 1.7% in the euro area and 1.3% in the EU, but the reading came below the FXStreet-cited consensus of a 1.9% decline.
The euro area unemployment rate fell to 6.3% in November from 6.4% in October, though it remained above the 6.2% level recorded a year earlier. The figure came below the 6.4% estimated by FXStreet.
In the EU as a whole, the unemployment rate was unchanged at 6.0% on the month and up from 5.8% in November 2024.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.3%, the S&P 500 index 0.2% lower, and the Nasdaq Composite down 0.3%.
The yield on the 10-year US Treasury widened to 4.16% at midday on Thursday from 4.15% on Wednesday. The yield on the 30-year widened to 4.85% from 4.82%.
In London, Associated British Foods shares dropped 11% after the Primark owner warned profit will be lower than expected in 2026.
"We now expect group adjusted operating profit and adjusted earnings per share to be below last year," the London-based company said in an unscheduled trading update.
JPMorgan analyst Georgina Johanan said AB Foods faces "trouble on several fronts."
She said the profit warning was driven by a combination of: weaker-than-expected sales in Primark Europe; significantly higher markdowns as a result of the softer top line; and a mixed performance in the Food business.
As a result, Johanan expects high single digit percentage downgrades to financial 2026 pretax profit consensus expectations.
"Given Primark's underperformance in Europe in recent history and, in our view, brand perception issues, it is difficult to conclude how much this warning should be read across to other players," the JPM analyst said.
Tesco shares fell 5.9% as quarterly sales fell short of expectations weighed by a surprise drop in sales at Booke.
"Competition is as intense as ever," said Tesco Chief Executive Ken Murphy.
The food retailer said like-for-like sales excluding VAT and fuel rose 2.4% in the six weeks to January 3 compared to a year ago.
Like-for-like sales on the same basis were up 3.2% in the UK and 3.8% in the Republic of Ireland.
Sales were down 2.1% at Booker and 0.8% higher in Central Europe.
As a result of what the firm called "a strong Christmas performance", Tesco now expects to deliver financial 2026 group adjusted operating profit at the upper end of its GBP2.9 billion to GBP3.1 billion guidance range issued in October.
It continues to expect free cash flow within its medium-term guidance range of GBP1.4 billion to GBP1.8 billion.
"These numbers are not a disaster as the company has its highest share of the British grocery market in more than 10 years," said AJ Bell analyst Russ Mould.
"A more than doubling in the share price from the 2022 lows means the company will be judged more harshly for the slightest misstep."
On the FTSE 250 index, Softcat shares led the way and rose 4.4%.
The Buckinghamshire, England-based provider of IT infrastructure products started a share buyback worth up to GBP45 million.
The buyback will be run by JP Morgan Securities and is expected to be completed during the first half of 2026.
Computacenter shares were 3.8% higher as it announced the acquisition of AgreeYa Solutions for an enterprise value of up to USD120 million.
Folsom, California-based AgreeYa Solutions is a technology solutions partner focused on the US enterprise market. It also has assets in India, through the AgreeYa India business.
AgreeYa is expected to report consolidated revenue in 2025 of USD120 million with adjusted earnings before interest, tax, depreciation and amortisation of USD14 million.
Hatfield, England-based technology services provider Computacenter said it will fund the deal, which is expected to be immediately earnings accretive, from existing cash resources.
Greggs shares were down 8.7% as it said market conditions remain challenging as it provided guidance for 2026 below current market consensus.
The Newcastle-upon-Tyne-based bakery chain said total sales were up 6.8% to GBP2.15 billion in the twelve months to December 27 from GBP2.01 billion a year ago. Company-managed shop like-for-like sales rise 2.4%.
"We made good progress in 2025, in a challenging year where subdued consumer confidence impacted the food-to-go market," said Chief Executive Roisin Currie.
"Subdued consumer confidence continued to impact the food-to-go market, as did weather extremes earlier in the year. Against this backdrop, Greggs increased its market share of visits, including at breakfast and in the evening," the firm said.
JPMorgan analyst Borja Olcese said the guidance for 2026 implies 5% downgrade to consensus estimates.
Ross Broadfoot at RBC Capital Markets called it a "disappointing update" and concurred that guidance for 2026 was 5% below his current estimate.
On the AIM market, Surgical Innovations shares retreated 7.8%.
The surgical and medical instrument manufacturer said Chief Financial Officer Brent Greetham told the board on Wednesday that he intends to leave the firm to "pursue other interests".
The firm said the process to appoint a new CFO is underway, while Greetham will work with the group during his six months' notice period to "ensure an orderly handover".
Greetham took over as CFO in February last year, after the departure of Chris Martin to "pursue another opportunity".
"As we look to the year ahead, we remain confident of the opportunities available, of how our reposable technology resonates with the market and the overall prospects of the group," said CEO David Marsh.
Gold was down at USD4,424.10 an ounce at midday on Thursday from USD4,458.54 late Wednesday. Brent oil was trading slightly higher at USD60.75 a barrel from USD60.37.
Still to come on Thursday's economic calendar is US weekly jobless claims data.
By Michael Hennessey, Alliance News reporter
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BAE SystemsAB FoodsTescoShellSoftcatComputacenterGreggsSurgical Innovations