London stocks were still firmer by midday on Monday amid renewed expectations of a rate cut by the Federal Reserve next month, but weakness in the defence sector capped gains amid hopes of a Ukraine peace deal.
The FTSE 100 was up 0.2% at 9,561.53.

Sentiment got a boost late on Friday after the head of the Federal Reserve Bank of New York said he sees scope for shortly reducing interest rates due to weakness in the labour market.

In a speech about inflation-targeting at a conference in Santiago, Chile, John Williams refrained from predicting when a rate cut would be appropriate, but said that he would support the move "in the near term".

"I still see room for a further adjustment in the near term to the target range for the federal-funds rate to move the stance of policy closer to the range of neutral," Williams said.

Joshua Mahony, chief market analyst at Scope Markets, said: "With the chance of a December rate cut jumping up to 75%, the tide appears to have turned in favour of additional easing next month. This week sees the release of both September and October core PCE inflation data, which will undoubtedly shed additional light on the Fed's thinking when taken alongside the likes of the durable goods, GDP, and personal spending figures. Coming hot off the heels of last week's mixed September jobs report, any particular signs of weakness are likely to be seen as a cause for optimism that we will see the Fed cut rates in December.

"The UK budget will undoubtedly grab the headlines in Europe this week, with the Chancellor likely having to raise over £30 billion through a smorgasbord of fiscal measures in the absence of the big ticket income tax hike previously mooted. With the government having floated a host of prospective policies, there could be a degree of optimism once we see the uncertainty lifted and the list narrowed down.

"The recent weakness evident in UK GDP, house prices, retail sales, and PMI data highlights the negative impact this period of uncertainty has had on the economy, with businesses and individuals delaying investment until we see greater clarity."

The mood was also lifted after the US and Ukraine said they had created an "updated and refined peace framework" to end the war with Russia following weekend talks in Geneva. However, the news dented the performance of defence firms, with BAE Systems, Babcock and Rolls-Royce all lower.

Shares of Ukraine-based iron ore producer Ferrexpo rocketed.

Anglo American nudged up after BHP confirmed it is no longer pursuing a takeover of its rival that had threatened to wreck the latter's $57bn merger with Teck Resources.

BHP said a potential tie-up with Anglo, which would have created the world's largest copper producer, still had "strong strategic merits", but it is confident in its own organic growth strategy.

BHP had walked away from a previous approach in May 2024 after Anglo's board rejected three proposals from the larger group.

AstraZeneca was a smidgen higher after saying it will invest $2bn ramping up manufacturing facilities in Maryland, America.

IMI was also in the black after it agreed to sell its Truflo Marine business to Fairbanks Morse Defense for an enterprise value of £225m.

Vistry jumped to the top of the FTSE 250 after Goldman Sachs initiated coverage of the housebuilder with a 'buy'. In a broader sector note in which it started coverage of five other housebuilders, Goldman said Vistry was well placed to capitalise on growth in the affordable housing sector.

The bank said its preferred picks are Barratt Redrow, Persimmon and Vistry.