UK equities have not yet suffered the kind of rout some investors expected, but the mood remains fragile. Harvey Jones argues that the FTSE 100 has been remarkably resilient despite a volatile spring, and says the next few weeks could still deliver sharp swings if geopolitical tensions push oil higher or unsettle sentiment further.

His focus falls on Babcock International, a defence and engineering group that has been one of the market’s stronger long-term performers but still endured a sharp pullback in April. Italian market commentary from Teleborsa said the shares fell on 10 April and again on 24 April, with technical indicators pointing to weakness relative to the FTSE 100. Even so, the wider investment case has not been derailed.

Jones says the recent sell-off has made the stock more interesting, though he concedes it is far from cheap. The company’s order book is reported to stand at about £10bn, which supports earnings visibility, and Babcock has continued to win government work. At the same time, its valuation remains above its own long-run norm, with the share price still reflecting a strong multi-year rerating. That makes the stock vulnerable if enthusiasm fades or if defence names continue to lose momentum.

That caution has also been echoed by Citi. According to Investing.com, the broker downgraded Babcock to neutral on 2 May, lifting its target price but saying the market has already priced in much of the upside from the recent rally. For Jones, that does not rule out further gains, but it does suggest investors should be selective. In his view, any deeper market wobble could open up better entry points across the UK market, with Babcock among the names worth watching closely.

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Source: Noah Wire Services