Rolls-Royce led the FTSE 100 higher on the first trading day of October as defence and aerospace names extended September’s re-rating, while heavier banks slipped as gilt yields ticked up at the London open.
The index traded around 9,368 points in early dealing, according to LSEG data, building on a third-quarter close that traders had already marked as one of the strongest for the engine maker in a decade. BAE Systems and Melrose Industries rose in sympathy, reflecting continued order momentum on submarine and combat-air programmes tied to NATO spending plans.
Why Rolls-Royce still dominates the tape
Analysts at Barclays and Jefferies reiterated overweight calls on Rolls-Royce this week, citing civil aviation shop visits and power-systems backlog conversion. The shares crossed a £100 billion market capitalisation last week; fund managers said October inflows from pension funds rebalancing away from stagnant consumer names have kept the stock on the buy list.
Insurers and asset managers were mixed. Legal & General rose on annuity demand commentary, while Standard Chartered eased as emerging-market currency desks flagged a firmer dollar against sterling in Asian hours.
Rates and the pound
The 10-year gilt yield moved a couple of basis points higher in early trade, a modest headwind for long-duration lenders. Sterling traded softer against the euro, which helped exporters such as HSBC and Unilever in the opening hour even as domestic-focused builders softened.
Traders said the session lacked a single macro catalyst beyond calendar effects: fund managers adjusting quarterly weights and corporates returning from a thin last week of September.
What investors watch next
October brings third-quarter trading updates from several FTSE heavyweights, including a clutch of miners reporting production figures against softer industrial metal prices. The Bank of England’s next policy decision is not due until November, leaving equity investors to focus on corporate guidance and any pre-Budget hints from Westminster.
For retail holders of UK index trackers, the defence tilt is a reminder that the FTSE 100’s sector mix has shifted away from oil majors alone: aerospace, banks, and consumer staples now share top weightings, making the headline index sensitive to both geopolitical headlines and domestic rate expectations.
Mid-cap movers
On the FTSE 250, warehouse REITs slipped as traders priced in higher debt costs, while mid-cap defence suppliers such as Chemring rose on export order commentary. AIM-listed drone-component makers saw thin volume but notable gains after a Ministry of Defence framework update mentioned smaller vendors.
Wealth managers said October is historically a strong month for UK equity inflows as Isa seasonality fades and pension funds rebalance. Whether defence can keep outperforming depends on earnings calls later this month, when CEOs must justify valuations against backlogged but not yet delivered hardware.