British stocks subdued as UK wage growth dulls rate cut hopes

(Reuters) - Britain's benchmark index was largely unchanged on Tuesday, while the domestically focused mid-cap index fell after data showing a pick-up in wage growth led investors to trim their bets on the pace of future rate cuts.

The blue-chip FTSE 100 was holding at 8,777.16 points as of 1030 GMT, while the mid-cap FTSE 250 had slipped 0.4%.

British pay growth accelerated in the last three months of 2024, underscoring why the Bank of England has adopted a careful stance about rate cuts despite a weak overall economy.

The BoE, earlier this month, lowered its benchmark interest rate to 4.5% from 4.75%. Traders are pricing in only two more rate cuts for the rest of 2025.

Among sectors, banks led the gains, rising more than 1%.

The aerospace and defence index rose 0.7%, adding to their 4.5% jump in the previous session after British Prime Minister Keir Starmer said it was crucial for all of Europe to spend more on defence.

On the flip side, luxury stocks such as Watches of Switzerland Group and Burberry slid 2.6% and 1.6%, respectively.

Utilities, often traded as bond proxy, lost 1.1%. Britain's 10-year bond yield was up three basis points at 4.561%.

Among individual stocks, Plus500 slid 5%, the most on the mid-cap index, after the trading platform's full-year forecast came in line with market expectations.

BT Group fell 5.4% after Citi double-downgraded the mobile and broadband operator's stock to "sell" from "buy".

(Reporting by Nikhil Sharma and Ragini Mathur; Editing by Savio D'Souza)