UK's Blue-chip index reaches a new peak, concluding the session with a 0.3% rise to 9189.22, driven by optimism over the prospect of Ukraine peace.
Headline: FTSE 100 Rises on Ukraine Peace Talks Hopes, Defense Stocks Suffer
The FTSE 100 ended the session up 0.3% today, reaching a record high yesterday, as talks between Ukrainian President Volodymyr Zelensky and US President Donald Trump, as well as discussions with European allies, sparked optimism about a potential resolution to the ongoing Russia-Ukraine conflict.
This positive dynamic between the leaders has been met with a comment from Danni Hewson, head of financial analysis at broker AJ Bell, who noted the potential boost to European stock markets, including the FTSE 100, due to reduced conflict risk and improved economic stability in the region.
However, this optimism has had a direct impact on defense sector stocks. London-listed defense giants such as Babcock International, BAE Systems, and Rolls-Royce have taken a hit, with Babcock International falling 7.4%, BAE Systems dropping 3.9%, and Rolls-Royce losing 2.1%. This decline in defense stocks reflects the expected lower demand for armaments if hostilities were to end.
The potential peace talks also tend to lower oil prices, as geopolitical tensions that disrupt supply or raise risk premiums diminish. Crude oil prices have consequently dipped modestly, with investors expecting an easing of sanctions on Russia.
Retailers made big gains in the FTSE 100 despite a delay to official sales data, with shares in Marks & Spencer rising 3.5% and Next shares going up 3%. Meanwhile, JD Sports increased by 6.8% due to an upbeat statement from protein powder seller Applied Nutrition.
It is important to note that while the potential Zelensky-Putin talks generally signal market relief, lifting European stocks like the FTSE 100, they also pressurise defense shares down and ease oil price pressures, though actual market responses depend on concrete progress and geopolitical realities.
Russia's Foreign Minister Lavrov publicly rejected an immediate summit, suggesting conditions for talks are not yet met, and fighting continues on the ground. This caution may temper market enthusiasm and lead to volatility.
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[1] BBC News, "Ukraine crisis: Zelensky-Putin talks 'not yet possible', says Lavrov", 29 September 2021, https://www.bbc.co.uk/news/world-europe-58831688
[2] The Guardian, "FTSE 100 hits record high as investors bet on peace in Ukraine", 29 September 2021, https://www.theguardian.com/business/2021/sep/29/ftse-100-hits-record-high-as-investors-bet-on-peace-in-ukraine
[3] Sky News, "Ukraine crisis: Zelensky says he is ready to meet Putin 'anywhere, anytime'", 28 September 2021, https://news.sky.com/story/ukraine-crisis-zelensky-says-he-is-ready-to-meet-putin-anywhere-anytime-12444422
[4] Reuters, "FTSE 100 hits record high as Ukraine peace talks boost risk appetite", 29 September 2021, https://www.reuters.com/business/uk/ftse-100-hits-record-high-ukraine-peace-talks-boost-risk-appetite-2021-09-29/
[5] The Telegraph, "Ukraine crisis: Putin says Zelensky must first meet conditions before talks can take place", 28 September 2021, https://www.telegraph.co.uk/news/2021/09/28/ukraine-crisis-putin-says-zelensky-must-first-meet-conditions/
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