UK Market Trades With Cautious Sentiment as Jobless Data Signals Headwinds

The FTSE 100 ended a muted session Tuesday, declining 8.80 points to 8,116.08 or down 0.11%, as investors adopted a guarded approach amid mixed economic signals from across the Atlantic. Uncertainty around escalating U.S. labor data releases—highlighted by the weekly jobs report—prompted positioning caution throughout the morning trade.

Economic Backdrop: Employment Concerns Emerge

Recent UK unemployment figures added to the cautious mood sweeping through equities. The jobless rate ticked up to 5.1% for the three-month period ending October, compared to 5% previously, signaling a subtle deterioration in labor market conditions. While wages excluding bonuses accelerated to 4.6% year-on-year—marginally ahead of the 4.5% expectation—the employment headcount contracted by 171,000 positions annually in November. However, comparing month-on-month data provided some relief, with payroll headcount expanding 38,000 to reach 30.3 million.

Including bonus components, earnings rose 4.7% during August through October, underscoring persistent wage pressure despite softer hiring dynamics.

PMI Data Presents a Brighter Picture

Offsetting some concerns, the UK S&P Global Composite PMI rebounded to 52.1 in December from November’s 51.2, exceeding consensus forecasts of 51.6. The services sector PMI strengthened to 52.1 from 51.3 previously, while manufacturing recovered more sharply, reaching 51.2 in December versus 50.2 a month earlier—evidence of tentative momentum building in the economy.

Sector Divergence Marks Session Activity

Defense-oriented equities bore the brunt of selling, with Babcock International dropping 5.6% and BAE Systems sliding 2.4%, as markets reassessed implications from Ukraine peace negotiations. Diversified industrials showed weakness, with Rolls-Royce Holdings dipping 1.4% despite announcing a £200 million interim share buyback commencing January 2, 2026.

Additional decliners included Centrica following its sale of Spirit Energy’s 15% Cygnus gas field stake to Serica Energy for £98 million, alongside losses in Informa, Burberry Group, Auto Trader, Scottish Mortgage, Spirax Group, Vodafone and HSBC.

Gainers provided modest offsetting strength, with JD Sports Fashion, Convatec Group, Endeavour Mining, EasyJet and Croda International climbing 1.7% to 2.2%, while Whitbread, Fresnillo, Hiscox, Legal & General, Intertek, DCC, Admiral Group and St. James’s Place also advanced notably.

The cautious sentiment reflected broader anxiety over U.S. economic momentum and its spillover effects on global growth, keeping the FTSE 100 anchored near session lows as traders awaited additional clarity on the employment landscape.