UK equities erased earlier losses to finish flat on Thursday as strong gains from defence and leisure stocks were offset by falls from energy majors and a mixed performance among retailers.
The FTSE 100 traded lower within a narrow range for most of the trading session but managed to finish just 0.04% lower at 10,044.69 - its third-highest close on record after settling at a new high of 10,122.73 on Tuesday.

"If anyone thought 2026 might bring a more measured, less volatile period for markets they're probably already ripping up their playbook," said Danni Hewson, head of financial analysis at AJ Bell. "Every day brings new considerations with most of them originating from the White House."

Defence stocks were performing well at home and abroad after US president Donald Trump called for his government's defence spending to reach $1.5trn, three times the current $500bn budget that the Pentagon is expected to receive this year.

Markets are still reacting to Trump's controversial raid on Venezuela last weekend, in which the US military detained the country's president and took control of its energy industry. According to Trump, who pledged to deliver 30m to 50m barrels of Venezuelan oil to the US, America's involvement in Venezuela could last for years.

Heightened geopolitical tensions continued to produce some wild swings across commodity markets on Thursday, with Brent crude up 2.1% at $61.21 a barrel following two days of losses on the back of oversupply concerns.

In economic data, the latest figures from Halifax showed that house prices fell 0.6% on the month in December following a 0.1% decline in November, missing expectations for a 0.2% increase. On the year, house prices rose 0.3% in December following a 0.6% jump the month before. Analysts were expecting an annual increase of 1.1%.

Defence stocks up

Defence stocks were among the day's best performers, with BAE Systems in particular up 5% on the back of hopes that Trump's calls for greater defence spending will boost demand. Others in the sector, including QinetiQ, Rolls-Royce and Babcock were also higher.

On the downside, Associated British Foods tumbled 14% as it cut its profit outlook due to weaker performances at its Primark retail chain and US foods operations in the 16 weeks to 3 January.

Tesco also dampened sentiment in the retail sector after reporting a slowdown in underlying sales growth over the key Christmas selling season. The grocery giant dropped 7% despite saying that full-year earnings were expected to be at the top end of guidance. Sainsbury's, which is due to update the market on Friday, also fell.

However, Marks & Spencer rose 5% as it left its full-year guidance unchanged after what it called "solid" Christmas trading. The high street bellwether saw like-for-like food sales rise 5.6% in the 13 weeks to 27 December, to £2.72bn

Energy major Shell was lower as it said it expected to post a loss in its chemicals and products division in the fourth quarter, but left guidance for the rest of the business largely unchanged. Sector peer BP was also in the red.

Greggs tanked on the FTSE 250 as the bakery chain posted a rise in fourth-quarter sales but said it expects flat profits this year amid subdued consumer confidence.

Meanwhile, leisure stocks like Mitchells and Butlers, Wetherspoons and Whitbread all gained on speculation that the government could announce a U-turn on business rates reforms for pubs following backlash from the industry.

Market Movers

FTSE 100 (UKX) 10,044.69 -0.04%
FTSE 250 (MCX) 22,892.30 0.05%
techMARK (TASX) 5,851.15 0.41%

FTSE 100 - Risers

Coca-Cola HBC AG (CDI) (CCH) 3,918.00p 5.55%
Smurfit Westrock (DI) (SWR) 3,136.00p 5.38%
BAE Systems (BA.) 2,023.00p 5.04%
Marks & Spencer Group (MKS) 344.80p 4.96%
Whitbread (WTB) 2,618.00p 2.15%
Coca-Cola Europacific Partners (DI) (CCEP) 6,470.00p 2.05%
Beazley (BEZ) 822.50p 2.05%
Reckitt Benckiser Group (RKT) 6,170.00p 1.92%
NATWEST GROUP (NWG) 644.20p 1.87%
Aviva (AV.) 690.60p 1.71%

FTSE 100 - Fallers

Associated British Foods (ABF) 1,850.00p -13.99%
Tesco (TSCO) 422.10p -6.74%
Shell (SHEL) 2,562.00p -3.52%
Glencore (GLEN) 413.00p -2.32%
Airtel Africa (AAF) 364.20p -2.31%
Sainsbury (J) (SBRY) 329.80p -2.02%
Croda International (CRDA) 2,674.00p -1.91%
DCC (CDI) (DCC) 4,414.00p -1.87%
Fresnillo (FRES) 3,440.00p -1.71%
SSE (SSE) 2,267.00p -1.69%

FTSE 250 - Risers

Hochschild Mining (HOC) 514.50p 4.91%
Softcat (SCT) 1,464.00p 4.57%
Ceres Power Holdings (CWR) 248.20p 4.37%
Endeavour Mining (EDV) 4,096.00p 4.33%
Computacenter (CCC) 3,212.00p 4.08%
Trustpilot Group (TRST) 184.40p 3.77%
Grainger (GRI) 197.60p 3.67%
Wizz Air Holdings (WIZZ) 1,313.00p 3.39%
B&M European Value Retail S.A. (DI) (BME) 170.50p 3.21%
Workspace Group (WKP) 419.50p 3.20%

FTSE 250 - Fallers

Greggs (GRG) 1,657.00p -6.54%
Pagegroup (PAGE) 224.20p -6.43%
Hays (HAS) 51.60p -5.49%
Raspberry PI Holdings (RPI) 284.80p -3.78%
Oxford Instruments (OXIG) 2,125.00p -2.75%
Close Brothers Group (CBG) 504.50p -2.70%
Genus (GNS) 2,565.00p -2.66%
Partners Group Private Equity Limited. (EUR) (PEY) 10.40p -2.35%
Me Group International (MEGP) 148.00p -2.25%
Coats Group (COA) 83.20p -2.23%