On Tuesday, London’s FTSE 100 experienced a decline, influenced by downturns in the energy and defence sectors. Meanwhile, investors evaluated new employment figures that bolstered anticipations for a potential interest rate reduction by the Bank of England later this week. The UK’s blue-chip FTSE 100 fell 0.3% by 1022 after closing 1% higher in the previous session, while the midcap FTSE 250 index was largely unchanged. Energy stocks fell 1.1%, tracking a decline in oil prices as prospects for a Russia-Ukraine peace deal appeared to strengthen, raising expectations of a potential easing of sanctions.

The Aerospace and Defence index declined 1.8% following discussions regarding a potential peace deal in Ukraine. Britain’s largest publicly traded defense firms – Rolls-Royce, BAE Systems, and Babcock experienced declines ranging from 1.4% to 4.1%. U.S. officials indicated on Monday that Ukraine might obtain security guarantees inspired by NATO’s Article 5 mutual defense commitment as part of a proposed peace agreement with Russia. On the flip side, precious metals and miners experienced a rise of 1.4%, while the travel-focused index saw an increase of 0.9%. A minimum of 17 sectors were exhibiting positive performance.

Meanwhile, Britain’s unemployment rate reached its highest level since the beginning of 2021, while private sector pay growth experienced its weakest performance in nearly five years leading up to finance minister Rachel Reeves’ annual budget last month. The disappointing jobs data has heightened expectations that the Bank of England will implement a rate cut on Thursday in an effort to bolster a struggling economy. Among individual stocks, IG Group rose 5.6% after the online trading platform stated it anticipates achieving revenue growth near the mid-point of its guided range in 2026. Serica Energy rose 2.71% after the company announced it had reached an agreement to acquire a portfolio of Southern North Sea assets from Spirit Energy.

Across the Atlantic, investors maintained a cautious stance in anticipation of a series of U.S. data releases, including the jobs report, which could provide insights into the future direction of Federal Reserve policy for the upcoming year.