FTSE 100 Dips Amid Energy and Defence Slump; Rate Cut Hopes Rise

The FTSE 100 index fell 0.7%, affected by energy and defence stock losses, as investors anticipate a Bank of England rate cut. Energy stocks declined 3% due to potential Russia-Ukraine peace deals easing sanctions. Precious metals rose, impacting the broader market dynamics.

On Tuesday, London's FTSE 100 index declined, impacted primarily by slumps in energy and defence sectors. Investors are processing new employment data which seems to bolster predictions of a forthcoming interest rate cut by the Bank of England later this week. The FTSE 100 closed 0.7% lower, with the midcap FTSE 250 largely stable.

Plunging oil prices, driven by optimism regarding a Russia-Ukraine peace deal, led to a 3% drop in energy stocks, while Aerospace and Defence saw a 1.6% decrease on similar peace deal talks. Major defence players BAE Systems and Babcock dropped 1.9% and 4.1%, respectively.

Meanwhile, Sterling rose 0.4% against the dollar, trending towards its highest mark in two months, further pressuring British export-focused businesses. In anticipation of the Bank of England's decision, a weak unemployment report and soft private sector pay growth were noted as contributing factors to prospective rate reductions, aiming to counter an ailing economy.

(With inputs from agencies.)