London stocks dip as oil drags; defence index hits record high

Jan 8 (Reuters) - London's FTSE 100 edged lower on Thursday, pressured by weakness in oil stocks, even as defence shares surged to a record high on rising military budgets and geopolitical tensions.

The blue-chip FTSE 100 .FTSE slipped 0.3% by 1040 GMT and the domestically focused mid-cap index .FTMC was 0.4% lower.

Shell SHEL.L dropped 2.6% after the oil major narrowed its projected range for fourth-quarter liquefied natural gas production, as it warned of a loss in its chemicals business. Rival BP BP.L was down 0.6%.

Oversupply concerns, with forecasts of a large surplus in early 2026 have stirred concern for the energy sector, even as oil prices inched higher on the day. O/R

Defence stocks .FTNMX502010, on the other hand, rose to a record high, joining a rally in shares of European and U.S. peers, after President Donald Trump called for higher U.S. defence spending.

BAE systems BAES.L gained 6.1%, while Chemring CHG.L and Avon Technologies AVON.L were up about 1% each. U.S. strikes on Venezuela have charged up geopolitical concerns, lifting defence shares earlier this week.

Meanwhile, British house prices rose by a slower-than-expected 0.3% in the 12 months to December, the weakest annual increase since March 2024, as economic and tax uncertainty overshadowed the market at the end of the year, mortgage lender Halifax said.

Among individual stocks, Associated British foods ABF.L slumped 11.3% after the Primark-owner warned annual profit would fall after a sharp slowdown at its Primark fashion chain and weaker U.S. demand hit its food businesses.

Greggs GRG.L fell 7.7% after the fast food chain warned subdued consumer confidence meant it would likely see flat profit this year, despite a pick-up in sales in the Christmas quarter.

Tesco TSCO.L was down 4.9% after the food retailer forecasted full-year profit at the upper end of its guidance as it reported a 3.2% rise in underlying UK sales for the key Christmas trading period.