By Patrick Munnelly, Market Strategist, Tickmill
The UK’s FTSE 100 began the week on a positive note, edging up a fraction by the close. This uptick was supported by a surge in aerospace and defence stocks. Investors were also keeping an eye on upcoming economic data to gauge the strength of the British economy.
Melrose agreement to generate $5bn in sales
Shares in Melrose Industries LON:MRO rose by 3.5% to 507, making it the top gainer on London’s blue-chip FTSE 100 index.
The British aerospace supplier announced that its GKN Aerospace Engines business had signed an agreement with GE Aerospace to expand their long-term partnership. This expansion is expected to generate total incremental GKN Aerospace sales of around $5 billion over the 30-year life of the GEnx engine.
As a result, Melrose Industries shares reached their highest level since September 18. The stock had already risen by approximately 74% so far this year.
Citigroup initiates JD Sports Fashion coverage with ‘Buy’ rating
Shares of sportswear retailer JD Sports Fashion LON:JD. rose by 0.5%, making it one of the top percentage gainers on the FTSE mid-cap index.
The increase came after Citigroup initiated coverage of the company with a “buy” rating and a price target of 220p. Citigroup anticipates that JD Sports’ greater geographic diversification compared to its peers will result in less sales volatility in the near term. The brokerage also sees a “significant opportunity” for JD to continue deploying its capital in the expansion of its premia fascia, which would generate returns above its weighted average cost of capital. According to LSEG data, 8 out of 13 analysts rate the stock as a ‘Buy’, with a median target price of 217.5p. As of the last close, the stock is up 4.08% year-to-date.
Unite reports strikes by engineering construction workers
On the negative side of the ledger, Unite LON:UTG sat at the bottom of the blue chip index, down 4.3% by the close as the UK’s workers’ union reported that thousands of engineering construction workers are prepared to strike after rejecting a pay offer. These workers, who operate under the National Agreement for the Engineering Construction Industry, turned down a two-year pay proposal that included a 10% increase for 2024 and a 5% increase for 2025.
UK GDP data in focus
On the fundamental front focus this week will be on the UK GDP data, which is anticipated to reveal a 0.1% monthly contraction in September, contrasting with the 0.2% growth in the previous month, as indicated by a Reuters survey of economists. Additionally, market participants will closely follow the remarks of several Bank of England officials, including Governor Andrew Bailey, who is scheduled to speak at the Irish central bank conference on Wednesday.
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