UK's FTSE 100 falls as oil, defence stocks weigh; domestic unemployment climbs

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FTSE 100 down 0.3%; FTSE 250 flat

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UK labour market shows strain, unemployment rises to 5.1%

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BoE expected to cut interest rates amid economic concerns

Dec 16 (Reuters) - London's FTSE 100 slipped on Tuesday, weighed 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 fell 0.3% by 1022 GMT after closing 1% higher in the previous session, while the midcap FTSE 250 index was largely unchanged.

Energy stocks fell 1.1%, tracking a fall 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 talks of a potential Ukraine peace deal. Britain's biggest listed defence companies - Rolls-Royce, BAE Systems, and Babcock were down between 1.4% and 4.1%.

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

On the flip side, precious metals and miners jumped 1.4%, while travel-focussed index added 0.9%. At least 17 sectors were trading in the green.

Meanwhile, Britain's unemployment rate hit its highest 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 Bank of England will cut rates on Thursday to support a faltering economy.

Among individual stocks, IG Group (IGGRF) rose 5.6% after the online trading platform said it expects to deliver revenue growth around the mid-point of its guided range in 2026.

Serica Energy (SQZZF) rose 2.71% after the company said it had agreed to acquire a portfolio of Southern North Sea assets from Spirit Energy.

Across the Atlantic, investors stayed cautious ahead of a slate of U.S. data, including the jobs report, that may help gauge the trajectory for Federal Reserve policy next year.

Wall Street futures were trading lower. (Reporting by Tharuniyaa Lakshmi and Nikhil Sharma in Bengaluru; Editing by Leroy Leo)