May 19 - UK equities moved higher on Tuesday as newly released labour data suggested a softer employment backdrop, reducing expectations of an imminent interest rate increase.
By 11:13 am GMT the blue-chip FTSE 100 index had climbed 0.61%, while the midcap-focused FTSE 250 was up 0.81%. The market advance followed figures from the tax authority showing that April payrolls decreased by 100,000 from March. Separately, the unemployment rate rose to 5.0% for the first quarter, up from 4.9% in the three months to February.
Economists and market participants said the data could temper the Bank of England’s policy trajectory. "Today’s labour market report will not just make for an uncomfortable reading, it will likely stop the MPC (Bank of England’s Monetary Policy Committee) in its tracks," said Sanjay Raja, chief UK economist at Deutsche Bank.
Market pricing reflected the change in expectations. Traders saw a 29.1% chance of a rate hike at the June meeting, according to data compiled by LSEG. At the same time, ING’s developed markets economist for the UK, James Smith, said: "We’re still forecasting a rate hike in June, but that is far from guaranteed." His commentary underlined the continued uncertainty around central bank timing.
The relief in equities came as investors sought a pause after a period of elevated political uncertainty. On Monday, Prime Minister Keir Starmer reiterated that he would remain at the helm, though several members of his Labour Party have publicly called for him to resign.
Sectors displayed differentiated moves. Investment banking stocks rose 2.58%, and retailers advanced 2.49% as part of the broader market uplift. On the FTSE 100, IG Group was the largest gainer, jumping 10.22% after the firm raised its annual and medium-term revenue forecasts for the second time this year.
The combination of softer jobs figures, mixed sector performance and company-specific guidance revisions produced a market environment in which investors reassessed the near-term prospects for policy tightening while watching corporate developments and political dynamics closely.