FTSE 100 rises to new record as defence stocks rally ahead of Bank of England decision

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The decision

The Guardian reports the FTSE 100 rose to a record high of 10,978.87 points, surpassing the previous day's mark of 10,951. The index gained 0.4%, with Rolls-Royce and BAE Systems among the strongest performers as investors bought UK defence stocks. The move came as markets awaited a Bank of England interest rate decision.

Why it matters

The FTSE's new high marks the second consecutive session of record closes, suggesting sustained momentum in London's large-cap market even as mid-cap and small-cap indices showed weaker performance. The timing ahead of the Bank of England decision indicates investors are positioning in sectors seen as less sensitive to domestic rate policy.

How we got here

The FTSE 100 has climbed steadily through late July, with the previous record set just one day earlier. On 30 July, the index was expected to retreat from record levels after the Federal Reserve held rates unchanged and Middle East conflict escalated, but it continued rising instead. Defence stocks globally have outperformed broader markets this year as NATO members increased military budgets and conflicts in Ukraine and the Middle East sustained demand for weapons systems.

What happens next

The Bank of England's rate decision will determine whether the rally extends or stalls, particularly for domestically focused stocks that have lagged the large-cap index. Investors will watch whether the central bank signals any shift in its policy stance. Defence sector performance will likely depend on whether government spending commitments translate into new contract awards in the coming quarters.

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