UK's FTSE 100 ends lower as oil, defence stocks weigh

Tue, 16th Dec 2025 17:01

Energy stocks fall on Russia-Ukraine talks

UK labour market shows strain, unemployment rises to 5.1%

BoE expected to cut interest rates amid economic concerns

Dec 16 (Reuters) - London's FTSE 100 closed lower on Tuesday, hurt by losses in energy and defence stocks, while investors assessed fresh jobs data that reinforced expectations for an interest rate cut by the Bank of England later in the week.

The UK's blue-chip FTSE 100 closed down at 0.7%, while the midcap FTSE 250 index was largely unchanged.

Energy stocks extended losses and dropped 3%, tracking a steep fall in oil prices as prospects for a Russia-Ukraine peace deal appeared to improve, raising expectations of a potential easing of sanctions.

The Aerospace and Defence index also moved lower, down 1.6% amid talks of a potential peace deal. Britain's biggest listed defence companies - BAE Systems and Babcock - were down 1.9% and 4.1%, respectively.

U.S. officials said on Monday that Ukraine could receive security guarantees modelled on NATO's Article 5 mutual defence pledge under a proposed peace deal with Russia.

Banks were also a drag, down 0.7%, while media-focussed stocks declined 1.7%.

Sterling strengthened 0.4% against the dollar, hitting its highest level in two months ahead of the BoE's decision on Thursday, exerting pressure on export-oriented domestic companies.

Britain's unemployment rate hit its highest level since the start of 2021 and private sector pay growth was the weakest in nearly five years in the run-up to finance minister Rachel Reeves' annual budget last month. The weak jobs data added to expectations that the British central bank will cut rates on Thursday to support a faltering economy.

On the flip side, precious metals and miners jumped 2.4%, boosted by gold prices. A U.S. jobs report showing the unemployment rate rose last month from September reinforced bets of rate cuts by the U.S. Federal Reserve and sent the dollar index lower.

Airline stocks benefited from lower crude prices, with EasyJet up 3.4%. The broader travel and leisure index gained 0.77%.

IG Group jumped 8.1% after the online trading platform said it expects to deliver revenue growth around the mid-point of its guided range in 2026. The stock lifted the IB and brokerage services index by 1.5%.

Serica Energy rose 5.3% after the company said it had agreed to acquire a portfolio of Southern North Sea assets from Spirit Energy.