- Babcock International Group
- 04 June 2025 18:04:24
Source: Sharecast
The FTSE 100 index rose 0.16% to finish at 8,801.29 points, while the more domestically focused FTSE 250 gained 0.48% to close at 21,119.01 points. Market sentiment was lifted after data showed the UK services sector returned to growth in May, suggesting resilience in the broader economy.
In currency markets, sterling was last up 0.3% on the dollar to trade at $1.3558, while it slipped 0.19% against the euro, changing hands at €1.1866.
“If markets are beginning to get worried about the impact of Trump’s tariffs, they’re managing to hide it well,” quipped IG chief market analyst Chris Beauchamp.
“US services activity may have slipped into contraction for the first time in almost a year, but once again bad data has been shrugged off.
“Nobody seemed to care about April data, but May seems to be going the same way too, as investors bet that the tariff pauses lead to a recovery in activity.”
Beauchamp said stocks “might be OK” with bad data, but the dollar was not.
“The greenback finds itself at the lows of the day, threatening a break to the late April lows.
“This is fuelling risk-on moves across FX markets, but next week’s CPI may yet provide some succour to beleaguered dollar bulls.”
UK services sector returns to growth as country avoids US steel tariffs
In economic news, the UK’s dominant services sector returned to growth in May, offering a glimmer of resilience amid broader economic uncertainty.
According to S&P Global, the UK services purchasing managers’ index rose to 50.9 from 49.0 in April, exceeding both the flash estimate of 50.2 and consensus forecasts.
The improvement marked a move back into expansion territory after a brief contraction and helped lift the composite PMI - which combines services and manufacturing - to 50.3 from 48.5.
However, manufacturing remained under pressure, with its PMI stuck at 46.4.
Survey respondents cited stronger client confidence and easing tariff concerns as factors behind the rebound, though rising input costs continued to dampen demand.
New business volumes fell for the fourth time in five months.
“The service sector regained its poise in May, as receding concerns about US tariffs, recovering global financial markets and greater confidence among clients all helped to support output growth,” said Tim Moore, economics director at S&P Global Market Intelligence.
“Output growth expectations for the year ahead also rebounded after April’s tariff-related slump.”
In a separate development, the UK secured a temporary reprieve from sharply higher US tariffs on steel and aluminium.
President Donald Trump confirmed the UK would remain subject to a 25% duty, while other countries faced a new 50% rate.
The exemption followed last month’s signing of a bilateral Economic Prosperity Deal, which was yet to be implemented.
Trump warned that the higher tariff could still apply if the UK fails to meet terms by a 9 July deadline.
Industry leaders welcomed the decision but said lingering uncertainty risks deterring US buyers.
Across the Atlantic, US economic data showed signs of strain.
Private payrolls rose by just 37,000 in May, well below the 110,000 expected, according to ADP.
Small and large businesses shed jobs, while most of the hiring came from medium-sized firms.
Wage growth for job-changers remained steady at 7%, but the weak employment reading adds to concerns about momentum in the labour market.
Separately, the US services sector contracted for the first time in nearly a year, as the Institute for Supply Management’s index slipped to 49.9 in May from 51.6.
Sub-indices tracking new orders, production, inventories and backlogs all weakened.
Analysts pointed to rising input costs driven by tariffs and government spending cuts as key drags.
The housing sector also showed signs of cooling - US mortgage applications fell for a third consecutive week, dropping 3.9% in the week to 30 May.
Refinancing and new loan applications both declined, although average 30-year fixed mortgage rates eased slightly to 6.92%.
Rising bond yields earlier in the month had driven rates to a four-month high, further denting demand.
Babcock in the green, B&M falls on weak earnings growth
On London’s equity markets, Babcock International rose 4.4% after JPMorgan placed the defence contractor on “positive catalyst watch” ahead of its 25 June results, citing potential for an upgrade to guidance.
The broker described Babcock as a key beneficiary of the UK’s latest Strategic Defence Review.
Antofagasta climbed 3.15% as JPMorgan also put the miner on “positive catalyst watch” ahead of its second-quarter update, maintaining an ‘overweight’ rating.
Chemring Group jumped 6.74% after it reported a record order book, reflecting heightened global defence spending.
WH Smith gained 3.13% after the retailer said it was well positioned for the busy summer travel season and posted a 5% rise in revenue for the 13 weeks to the end of May.
Among notable movers on results day, Discoverie Group surged 15.64%, Ninety One rallied 9.49%, and Paragon Banking Group added 0.72%, all supported by earnings updates.
On the downside, B&M European Value Retail slumped 13.55% after posting only a marginal 0.6% increase in adjusted EBITDA to £620m for the year, as the company flagged continued economic pressures.
Hammerson slipped 0.85% after announcing that CEO Rita-Rose Gagné plans to step down in 2026, ending a five-year tenure at the property group.
Reporting by Josh White for Sharecast.com.