FTSE rises as defence stocks gain

Anna Wise

The UK’s FTSE 100 has started the week on a positive note as turmoil in Venezuela helped spark a fresh boost for defence and mining stocks.

Investors appeared to react steadily to the political turbulence, with experts suggesting the impact to financial markets could be limited.

The FTSE 100 was rising by up to 0.7% in early trading on Monday, before paring back gains to be about 0.2% higher by mid-morning.

The index was teetering close to the 10,000 mark, having passed the milestone during intraday trading on Friday but failing to close above the level.

Defence stocks were leading the charge with BAE Systems and Babcock both climbing by more than 4%. Rolls-Royce was also up by more than 2% to reach a new record high price.

Demand for shares in defence and aerospace firms can typically rise in the face of geopolitical uncertainty on the expectation that governments could increase military spending in response.

It follows the US capture of Venezuelan president Nicolas Maduro over the weekend, and promises by President Donald Trump that the US will “run” Venezuela until a new government takes over.

Miners were also making advances with Endeavor Mining up by nearly 5%, precious metal producer Fresnillo rising more than 4%, and Antofagasta and Anglo American up by about 3%.

It followed a slight drop in the price of Brent crude oil, but prices were edging higher again after early trading.

Russ Mould, investment director at AJ Bell, said the FTSE 100 was rising as investors “loaded up on shares in gold miners and defence contractors off the back of strikes on Venezuela”.

“Heightened geopolitical tensions like the ones we’ve seen over the weekend would normally spook investors, but global markets have avoided a sell-off.

“Investors appear to be taking the view that events in Venezuela will not lead to full-blown war.

“This situation is still fluid, which means that investor sentiment could quickly change.”

John Wyn-Evans, head of market analysis at Rathbones, said: “The removal of President Nicolas Maduro marks a significant geopolitical moment, but from a market perspective, its impact is expected to be limited.

“Venezuela represents just 0.1% of global GDP and contributes around 1% of the world’s oil supply – a stark contrast to the 1970s when those figures were 1% and 8%, respectively.

“This long-term decline is largely attributable to poor governance.”