The UK’s FTSE 100 index edged higher on Tuesday, bolstered by a recovery in aerospace and defense stocks. Investors are now closely monitoring a series of critical economic data releases from around the globe, which could significantly influence central bank decisions on interest rates this month. The market's cautious optimism reflects a broader uncertainty as traders brace for potential shifts in monetary policy from the U.S. Federal Reserve, the European Central Bank, and the Bank of England.

Aerospace and Defense Lead FTSE 100 Recovery

Rolls-Royce Drives Sector Rebound

The FTSE 100 index climbed 0.2% by 0715 GMT, with aerospace and defense stocks leading the charge. Rolls-Royce, a key player in the sector, saw its shares rise over 3%, recovering from steep losses the previous day. The uptick followed news that Cathay Pacific Airways successfully repaired three of the 48 Rolls-Royce engines under inspection, with all affected aircraft expected to return to service by Saturday. This positive development pushed the broader aerospace and defense index up nearly 2%, reversing the steepest one-day decline the sector had seen since November 2022.

Other Key Gainers

Watches of Switzerland Group also made significant gains, jumping 6% after reaffirming its full-year forecast. Meanwhile, Ashtead Group saw a 3.4% increase after the equipment rental company projected full-year results in line with expectations. Hikma Pharmaceuticals rose 2% following an upgrade by Berenberg, which moved the British drugmaker’s rating from “hold” to “buy.”

Miner Struggles Amid Weak Metal Prices

Miners Face Downward Pressure

Despite the overall market lift, the mining sector was the worst performer, weighed down by declining base metal prices. The sector's struggles highlight ongoing concerns about global economic health, particularly as weak commodity prices often signal slowing industrial activity.

Focus on Central Bank Decisions

Upcoming Economic Data in the Spotlight

Investor attention is firmly on the forthcoming monetary policy decisions from major central banks, including the U.S. Federal Reserve, the European Central Bank, and the Bank of England. Both the Fed and the ECB are widely expected to implement rate cuts in September, but the scale of these cuts will likely depend on the latest economic data.

Key Economic Indicators to Watch

U.S. Employment Data Takes Center Stage

In the U.S., the release of employment figures, particularly the August payrolls report, is at the top of investors’ watch lists. These figures will be crucial in shaping expectations for the Fed’s next move.

UK and European Economic Data Also Critical

In the UK, attention will be on the Purchasing Managers’ Index (PMI) and housing data, which are key indicators of economic activity and consumer confidence. Meanwhile, Europe’s producer prices and retail sales figures, set to be released later this week, will provide insights into the continent's economic performance and influence the ECB’s policy decisions.