FTSE 100 movers: Defence firms rally; housebuilders in the red

London’s FTSE 100 was down 0.3% at 8,774.37 in afternoon trade on Monday.

Defence firms Rolls-Royce, Babcock and BAE Systems were among the biggest risers.

Rolls-Royce chief executive Tufan Erginbilgic confirmed over the weekend that the company will return to the larger "narrow body" or "single aisle" market as Labour puts the move at the heart of its industrial strategy.

"This is the single-biggest opportunity for economic growth for the UK in the next 50 years," he told the Sunday Times.

Meanwhile, Babcock got a boost after Citi hiked its price target on the stock to 1,338p from 730p and reiterated its ‘buy’ rating as it said growth is likely to accelerate over the next 10 years.

The bank said it was updating its our forecasts, with three main changes: 1) reaching 8% margins a year early in FY March 2026; 2) 9% margins by March 2030; and 3) accelerating growth post-2030.

Citi said it’s the accelerating growth that really changes its fair value. It noted that prior to last week’s Nato conference, the UK defence budget was expected to reach 2.5% in 2027 and remain at that level.

"The new commitment to grow from circa 2.5% in 2029 to 3.5% in 2035 means that we lift our medium-term growth (years 6 -10) from 3% (in line with nominal GDP) to 9%."

Th bank said these factors are behind the price target increase.

Housebuilders were in the red, with Persimmon, Barratt Redrow and Taylor Wimpey all down.

RBC Capital Markets said in a research note that the recent Spending Review delivered "significantly ahead" of its expectations but also questioned whether solving for supply has shifted the problem to demand.

"Two of the key building blockers have now, on paper, been addressed. It will take time for the planning changes to take effect and for the £39bn Affordable Housing Programme to be deployed, but our RBC Elements™ Homefi data suggests that whilst two problems have been fixed, another one may be about to emerge," it said.

"The Labour Party may have beat the blockers, but does it now need to provide a boost for buyers?"

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 972.80p 1.95%
Imperial Brands (IMB) 2,867.00p 1.52%
Auto Trader Group (AUTO) 830.80p 1.17%
Flutter Entertainment (DI) (FLTR) 20,490.00p 0.94%
Babcock International Group (BAB) 1,147.00p 0.88%
BAE Systems (BA.) 1,878.00p 0.86%
Smith & Nephew (SN.) 1,118.00p 0.81%
Reckitt Benckiser Group (RKT) 4,982.00p 0.79%
The Sage Group (SGE) 1,259.50p 0.72%
Coca-Cola HBC AG (CDI) (CCH) 3,788.00p 0.53%

FTSE 100 - Fallers

Intermediate Capital Group (ICG) 1,937.00p -3.73%
Persimmon (PSN) 1,305.50p -3.08%
Barratt Redrow (BTRW) 461.50p -2.62%
Taylor Wimpey (TW.) 119.45p -2.41%
Experian (EXPN) 3,769.00p -2.28%
Spirax Group (SPX) 6,010.00p -1.48%
Unite Group (UTG) 845.00p -1.46%
Antofagasta (ANTO) 1,801.50p -1.42%
Schroders (SDR) 361.80p -1.42%
Croda International (CRDA) 2,978.00p -1.33%