FTSE 100 rises as investors seek defensive stocks amid higher yields

London’s FTSE 100 index rose on Monday as investors moved towards defensive sectors, including healthcare and consumer staples. The gains came as oil prices and bond yields resumed their advance ahead of a week filled with central bank policy decisions.

The blue-chip FTSE 100 gained 0.77% to 10,732.13 points. In contrast, the mid-cap FTSE 250 fell 0.28% to 23,908.74 points, earlier touching its lowest intraday level in more than a month.

Oil gains support energy stocks

Oil prices rose about 3% following fresh strikes on Saudi Arabian infrastructure and Gulf shipping.

The increase supported major energy companies, with Shell and BP gaining around 1.2 and 1.5% respectively.

The wider energy sector also rose 1.1%.

Energy stocks had outperformed other sectors the previous week, helping limit the FTSE 100’s decline during its biggest weekly fall in more than a month.

However, higher oil prices continued to raise concerns over inflation and the broader economic outlook.

Disruptions to shipping routes and infrastructure have added to uncertainty in energy markets.

British government bond yields also moved higher on Monday, reaching new multi-year highs across several maturities.

Rising yields can increase borrowing costs and influence investor demand for equities.

Defensive sectors outperform

Investors favoured sectors traditionally viewed as defensive amid uncertainty over oil prices, inflation and interest rates.

Pharmaceutical stocks rose 2.7%, while GSK gained 4.6% after announcing positive results for two lung cancer drugs, Jideytro and Ris-Rez.

Consumer-facing sectors also advanced. Personal care, drug and grocery stocks rose 2.6%, while beverage companies gained 2.8%.

By contrast, industrial and precious metal mining stocks were among the biggest percentage decliners as metal prices fell.

Technology stocks also showed mixed performance.

Futures linked to the technology-heavy Nasdaq Composite dropped 1.6% after executives from major artificial intelligence laboratories, including OpenAI and Anthropic, called for slower development of the technology.

The comments weighed on AI-linked stocks globally.

Despite the weakness in US technology futures, the FTSE 350 technology sector rose 3.9%.

Central bank decisions in focus

Investors are preparing for several key central bank decisions and economic reports this week.

UK employment and inflation data are due ahead of the Bank of England’s interest-rate decision, with markets widely expecting the central bank to hold rates steady.

The US Federal Reserve is scheduled to announce its decision on Wednesday.

Markets were pricing in an 88.5% chance of a 25-basis-point rate increase, according to CME’s FedWatch Tool.

Domestically, Prime Minister Andy Burnham is meeting business leaders, entrepreneurs and local mayors at Downing Street to discuss the government’s economic growth plans.

The meeting includes executives from banks, energy companies, retailers, telecom firms and industrial businesses.

It comes ahead of Chancellor John Healey’s first budget on October 28, which is being prepared amid higher borrowing costs and the economic impact of the Iran war.

Elsewhere, GlobalData was the weakest performer on the FTSE 250, falling 21% after the data analytics and consulting company said its annual revenue growth would be more muted than previously expected.