FTSE 100 today: Index creeps higher as Reeves unveils spending review; GBP rises

U.K. markets reacted to Chancellor Reeves' spending review, which pledges increased funding for government departments and substantial investments in infrastructure, defense, and social housing, leading to a 0.1% rise in the FTSE 100 and a 0.4% increase in the British pound; U.K. homebuilders rallied on expectations of a £39 billion affordable housing plan. In other news, Assura accepted a £1.7 billion takeover offer from a KKR-Stonepeak consortium, while WSP Global plans to acquire Ricardo for £363.1 million, and Ibstock shares plunged 15% due to profit margin pressures.

Analysis

The U.K. market exhibited positive momentum, with the FTSE 100 index rising 0.1% and the British pound strengthening 0.4% against the dollar to 1.3555, largely driven by Chancellor Rachel Reeves' latest spending review. This review outlined an annual real-terms increase of 2.3% in government departmental budgets, allocating over £2 trillion in public spending, and an additional £190 billion for day-to-day public services, alongside substantial investments in infrastructure, defense, and a notable £39 billion, 10-year plan for affordable housing. This housing initiative directly fueled a rally in U.K. homebuilder shares, with Vistry Group (LON:VTYV) surging almost 6% and Bellway (LON:BWY) gaining nearly 2.6%. In international developments, the U.S. and China reportedly finalized a trade agreement framework involving 55% U.S. tariffs and 10% Chinese tariffs, which also includes provisions for China to supply rare earth materials, though this deal awaits final approval from both presidents. Corporate activities presented a varied landscape: Quilter PLC (LON:QLT) shares climbed over 5% following a UBS upgrade to "buy," attributed to improved expectations for client inflows and platform performance. M&A activity was highlighted by Assura plc (LON:ASUR) shares increasing over 2% after its board accepted a £1.70 billion all-cash acquisition proposal from a KKR-Stonepeak consortium at 60 pence per share. Additionally, WSP Global announced its intention to acquire Ricardo for approximately £363.1 million, offering a 28.4% premium over Ricardo's recent closing share price. Conversely, Ibstock PLC (LON:IBST) shares plunged over 15% after a trading update cautioned about ongoing profit margin pressures, despite increased first-half sales driven by a rebound in new residential construction. GlobalData PLC (LON:DATA) confirmed the termination of acquisition talks with private equity firm ICG. On the regulatory front, the U.K.’s Competition and Markets Authority is reviewing the potential market impact of a planned merger between Evri and DHL. Meanwhile, the Bank of England’s Vicky Saporta urged U.K. banks to reassess their liquidity approaches in anticipation of decreased overall liquidity due to ongoing BoE bond sales and forthcoming loan repayments. In contrast to the U.K.'s gains, Germany's DAX index dropped 0.3% and France's CAC 40 fell 0.4%.

Key Decisions for Investors

• Consider exposure to U.K. homebuilders like Vistry Group (VTYV), which surged nearly 6% on the announcement of the government's £39 billion affordable housing plan, but closely monitor the plan's execution and individual company financial health.
• Exercise caution with building material suppliers such as Ibstock (IBST), whose shares plunged over 15% due to margin pressures despite increased construction activity, highlighting the need to assess company-specific resilience to cost inflation against sector tailwinds.
• Evaluate M&A opportunities in U.K. healthcare real estate and environmental consultancy, noting the Assura (ASUR) acquisition by a KKR-Stonepeak consortium for £1.70 billion and WSP Global's bid for Ricardo at a 28.4% premium, while also acknowledging deal completion risks as seen with GlobalData's (DATA) terminated talks.
• Review U.K. wealth management firms like Quilter (QLT), which saw its shares rise over 5% after a UBS upgrade attributed to positive client inflow and platform performance expectations, contingent on verifying sustained operational improvements.
• Monitor U.K. financial institutions for their adaptation to tightening liquidity conditions, as flagged by the Bank of England, and stay informed on regulatory developments such as the CMA's review of the Evri-DHL merger for potential impacts on market competition.