UK Equities Inch Higher Despite Mining Drop Amid Cooling Labour Market

British equities slightly rose on Tuesday as signs of a cooling labour market emerged, although industrial metal miners saw declines. The unemployment rate increased to 4.4%, slightly above expectations. Traders anticipate a possible interest rate cut by the Bank of England in the coming months, boosting homebuilders' stocks.

British equities edged higher Tuesday on further signs of a cooling labour market in the UK, although a drop in industrial metal miners capped the gains.

The benchmark FTSE 100 index inched up 0.1%, while the mid-cap FTSE 250 index was up 0.3%. The pound slipped against the U.S. dollar and was last at $1.2721.

The unemployment rate in Britain for April rose to 4.4% from 4.3%, data showed. A Reuters poll had pointed to an unchanged unemployment rate. Wages excluding bonuses -- being watched by the Bank of England (BoE) as it considers when to cut interest rates -- grew by 6% in April, compared with expectations of 6.1% growth.

"This morning's labour market report and the higher unemployment rate does just enough to keep the door open to an August rate cut," said Ben Laidler, global markets strategist at eToro. Homebuilders gained 1%, as rate cuts would lower mortgage rates, boosting demand for homes.

Traders are now expecting a roughly 60% chance of the BoE cutting rates in September. The central bank meets in less than two weeks from now to take a call on borrowing costs. Among individual stocks, Rio Tinto lost 2.2% as the mining giant said it will buy Mitsubishi Corp's 11.65% stake in Boyne Smelters (BSL) for an undisclosed sum.

Industrial metal miners fell 1.9%, the most among the FTSE 350 sectors, tracking the drop in base metal prices. Computer maker Raspberry Pi soared more than 30% in its trading debut.

Oxford Instruments surged 11% after the nanotechnology tools maker's full-year results beat estimates. Investors now look out for U.S. inflation data and the dot pot in the U.S. Federal Reserve's policy decision on Wednesday.

"Markets are keeping half an eye on the double bill of U.S. inflation tomorrow, basically the most important numbers in global markets," Laidler said.