The FTSE 100 was higher on Tuesday as banks and defence companies outweighed another fall in the oil majors. By 10.33am the index was up 0.2 per cent at 10,811.28, according to Reuters. By lunchtime AJ Bell had it up 0.5 per cent, 50.82 points, at 10,833.69. The FTSE 250 was firmer still, up about 0.6 per cent in the morning and 0.7 per cent by midday. Monday's open was 10,709.78. The first full session at a 4 per cent Bank Rate has been followed by a second session in which the index is being pulled in two directions at once.
Oil is the downward pull. Brent was around 91.15 dollars a barrel at midday, against about 94.27 dollars late on Monday, and one wire had it briefly under 90 dollars as President Trump said the war with Iran was militarily effectively over. He did not rule out further US action. Shell was down 1.8 per cent at lunch and BP 1.6 per cent. Reuters put the energy sector's fall at 2.2 per cent around mid-morning. The upward pull is everything that gets cheaper when fuel does, plus the companies that sell weapons and engines. Aerospace and defence led the sector boards, up 2.4 per cent. Rolls-Royce rose 3.3 per cent. Melrose and Babcock were each up more than 1 per cent.
The Suffolk story and the City story
The two stories met over Suffolk. US tankers left RAF Mildenhall on Monday after reports of a threat linked to Iran, a claim the BBC has not independently verified. Markets traded the presidential comment. The aircraft movement is the reason defence shares can rise on a day when the oil price says the risk is fading. Lion Finance led the blue chips at one stage, up 3.6 per cent. Prudential gained about 3 per cent and Barclays about 2.2 per cent. Vodafone fell 1.1 per cent even after it raised its full-year profit and cash-flow guidance. Marks and Spencer rose 1.9 per cent after setting out medium-term profit growth ahead of sales.
Tuesday, Late Morning
- FTSE 100: 10,811.28 at 10.33am, up 0.2 per cent. Lunchtime print: 10,833.69, up 0.5 per cent.
- Brent: about 91.15 dollars at midday, down from about 94.27 dollars late Monday.
- Rolls-Royce up 3.3 per cent. Shell down 1.8 per cent, BP down 1.6 per cent.
- Bank Rate is 4 per cent. Markets put a December rise at about 50-50.
- US inflation figures for October were the next number on the tape.
A December rise is back in the price
Clare Lombardelli, a deputy governor of the Bank of England, told the Guardian she would not rule out a rate rise in December. Money markets, on LSEG data cited by Reuters, put the chance of a quarter-point increase at the 17 December meeting at roughly half. That is a different conversation from last week, when the Monetary Policy Committee lifted Bank Rate to 4 per cent by eight votes to one and the next question was how long it would stay there. A further rise would take the rate to 4.25 per cent. Gilt traders will want the minutes, the vote, and whatever US inflation does to the dollar before they decide whether Tuesday's equity gain survives the afternoon.
The US consumer price index for October was the number London was waiting on. Forecasts ahead of the release pointed to annual inflation of 3.9 per cent, up from 3.7 per cent in September. A hotter print would harden the case for a Federal Reserve move in December and, by the usual channel, for the Bank here. Away from the index, the British Retail Consortium said retail spending rose modestly in October despite higher petrol prices, with households holding money back ahead of Black Friday. Worldpanel by Numerator found people buying more essentials after the government's Be Ready campaign, and no sign of panic buying. Monday's open belonged to the miners. Tuesday's morning belonged to anyone who does better when oil falls, and to anyone who sells the kit that moves when a base does.