FTSE 100 Faces a Mixed Morning as Gold and Defence Stocks Retreat
The London market started Friday with modest declines as gold prices pulled back from their recent highs and investors weighed the impact of easing tensions in the Middle East on defence stocks. The FTSE 100 hovered around the 9,500 level, with sentiment cautious amid a broad backdrop of currency, commodity and geopolitical headlines.
Gold Behind the Pullback: Mining Stocks Under Pressure
Gold’s retreat from the $4,000 an ounce mark to the mid-$3,900s weighed on mining shares, especially the gold miners that had been leading gains in recent sessions. Fresnillo and Endeavour Mining led the decline among miners in early trading, as investors took profits after a strong rally. The broader mining complex also faced pressure as the metal softened and risk premiums eased on geopolitical developments.
Analysts noted that a gold pullback can ripple through mining valuations even when underlying demand remains solid. Investors were balancing the inflation-hedge appeal of gold against the prospect of a less volatile geopolitical backdrop lowering the need for defensive bets tied to precious metals exposure.
Defence Stocks: A Measured Day as Geopolitics Stabilise
Defence stocks were among the notable standouts in the morning session for their earlier strength, but prices softened as tensions appeared to ease and potential ceasefire progress in Gaza dampened the risk premium attached to sector exposure. BAE Systems and Rolls-Royce were both trading lower by around 2.5% in early trading, reflecting a shift in investor appetite away from defence plays that had benefited from elevated Middle East risk premia.
Market observers suggested the move was part of a broader rotation as the immediate threat of an escalation in the region seemed to recede. With fewer near-term catalysts, investors turned to cyclical and consumer stocks for relative resilience, even as the overall market remained soft in early trading.
Oil and Energy: Brent Retreats on a Reduced Supply-Driven Rally
Oil prices followed the softer tone, with Brent crude easing around 0.6% as markets priced in a softer near-term energy demand scenario amid a calmer geopolitical backdrop. The energy complex faced a tricky balance: while higher energy prices can support energy equities, a stable regional risk profile can temper the case for aggressive energy exposure in an equity portfolio.
What Traders are Watching Next
Analysts pointed to the upcoming US earnings season as a major focus, even as the US government shutdown continues to limit domestic economic releases. Banks and large financial institutions are expected to report next week, providing a litmus test for deal-making activity, trading income, and consumer credit health in a slower-growth backdrop.
In Europe, markets showed a mixed picture, with Frankfurt slightly higher and Paris posting modest gains as concerns over geopolitical risk cooled. The UK market, meanwhile, remains sensitive to domestic data, currency moves, and the pace of global growth headlines as traders look for the next directional cue.
Bottom Line
The FTSE 100’s drift lower reflects a confluence of profit-taking in gold and defensive cyclicals, alongside cautious sentiment as geopolitical risk eases somewhat and investors await new earnings and policy cues. As attention shifts to US results and European growth indicators, the Footsie could seek a new foothold near the 9,500 level, with any sustained moves likely tied to evolving macro headlines.
