London stocks rise but defence shares retreat after Ukraine talks

By Ragini Mathur

Aug 19 (Reuters) - Britain's main indexes climbed on Tuesday with broad-based gains, though advances were tempered by losses in defence stocks as investors assessed prospects for a Russia-Ukraine peace deal.

The blue-chip FTSE 100 .FTSE gained 0.3%.

The midcap index FTSE 250 .FTMC rose 0.4%, snapping a three-day losing streak.

Market sentiment improved following U.S. President Donald Trump's meeting on Monday with Ukraine's President Volodymyr Zelenskiy and European allies, where he pledged U.S. support for Ukraine's security in any war-ending agreement.

However, Trump conceded that Russian President Vladimir Putin might reject negotiations entirely.

Aerospace and defence sector .FTNMX502010 fell 2.8%, marking its largest single-day decline since early April, though it maintains a 70% yearly gain.

This retreat mirrored broader European defence stocks as investors locked in profits after a strong performance.

Financials led the FTSE 100 gains, with the banking index .FTNMX301010 rising 0.3%. Lender Metro Bank MTRO.L advanced 5.3% after RBC Capital Markets upgraded the stock to "outperform" from "sector perform".

"Banks are potentially benefiting from the fact that the Bank of England may be slower in cutting rates than initially expected," said Fiona Cincotta, senior market analyst at City Index.

A Reuters poll indicated most economists expect one more quarter-point rate cut this year, while money markets are not fully pricing in another reduction until February, reflecting policymakers' recent cautious stance.

Investors now await Wednesday's UK consumer inflation data for further clarity on monetary policy direction.

"Upbeat sentiment following yesterday’s meeting between Donald Trump and European leaders including Volodymyr Zelenskiy, coupled with the expectation that July’s inflation data due out tomorrow will only be slightly higher than the previous month, has also helped," said Danni Hewson, head of financial analysis at AJ Bell.

Consumer related stocks added to the positive momentum with personal goods index .FTNMX402040 advancing 4.7%.

JD Sports JD.L gained 7% after Deutsche Bank raised the price target on the sportswear retailer's stock

Among other movers, International Workplace Group IWG.L fell 12.8% - its worst single-day performance since March 2020 - after the office rental company indicated annual adjusted core profit would likely hit the lower end of its forecast.

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