The FTSE 100 bounded higher on Tuesday as bond yields fell back amid trimmed bets on interest rate hikes after traders digested UK jobs data.
But what’s good news for the FTSE 100 isn’t necessarily good news for the underlying UK economy. UK unemployment rising to 5% was the force behind tempered fears about inflation and interest rate hikes.
“The rise in unemployment from 4.9% to 5% adds to mounting evidence that cracks are beginning to widen in the labour market. Vacancies are also continuing their steady descent, falling again to 705,000, the lowest level since early 2021,” said Susannah Streeter, chief investment strategist, Wealth Club.
The Bank of England is unlikely to make as many interest rate hikes this year if the jobs market continues to soften.
Further stabilisation of bond markets helped lift the mood as traders mulled the implications of an Andy Burnham-led government.
London’s leading index was 0.6% higher as the 30-year UK gilt yield eased back to 5.73%.
FTSE 100 companies received a minor boost from oil prices as Brent fell back after Trump reportedly called off an attack on Iran. News that the US President was swayed by its Middle Eastern allies ultimately shows a broad willingness to end the conflict, even if negotiations are taking longer than everyone would like.
“Trump’s hot/cold demeanour around the Iran war continues to cause volatility on the markets,” said Russ Mould, investment director at AJ Bell.
“With the US president having yesterday called off a new military attack on Iran, investors are showing relief that tensions haven’t escalated. That’s helped oil prices to ease back slightly and equity markets to move higher in Europe and Asia.”
Brent was trading down 1.8% at the time of writing but was still above $100.
Defensive names were again among the better performers as investors sought havens amid rising tensions in the UK political scene and the Middle East war.
The reliable revenues and a recent sell-off of utilities, including Severn Trent, National Grid, and United Utilities, have made them an attractive option. The three were all around 2% higher on Tuesday.
Mining stocks were the top fallers at the time of writing as losses for the sector continued. The miners have had a solid 2026 to date, and recent declines look like natural profit taking.
IG Group was the FTSE 100’s top riser, storming 8% higher on the news that Q1 total revenues soared 21% to £339.9m. The firm typically does well during periods of volatility, such as that we saw after the US and Israel attacked Iran.