FTSE 100 up on defence boost; Supreme Court motor finance verdict hits some banks 

(Reuters) - Britain's benchmark index closed higher on Monday, supported by aerospace and defence stocks, while some banks slid after the Supreme Court rejected a move by finance minister Rachel Reeves to intervene in a car loan mis-selling case. 

The blue-chip FTSE 100 closed 0.4% higher, while the more domestically focused midcap FTSE 250 edged up 0.1%.

Defence company BAE Systems jumped nearly 9% to the top of the blue-chip index, riding the coattails of rising defence stocks across Europe.

The UK's aerospace and defence index led sectoral gains, rising 4.5% as British Prime Minister Keir Starmer said his country's national security was facing a generational challenge and that it was crucial for all of Europe to spend more on defence.

Head of the EU executive Ursula von der Leyen also said the European Commission will propose exempting defence from EU limits on government spending, at a time when U.S. President Donald Trump has asked European members of security group NATO to finance their own defence against a potential Russian attack.

European leaders met in Paris for an emergency summit on Ukraine after U.S. officials suggested Europe would have no role in any upcoming talks aimed at ending the conflict with Russia.

Investors priced in the likelihood of increased government bond issuance to fund military spending, sending yields on UK's 2-year benchmark bond to their highest in two weeks.

Higher yields weighed on real estate-related stocks such as Segro and Land Securities, which dropped 2% and 0.8% respectively. On the other hand, banks gained 1.2%.

Lenders Close Brothers <CBRO.L> fell 8% and Lloyds <LLOY.L> declined 1.9% however after the UK Supreme Court rejected finance minister Rachel Reeves' attempt to intervene in a case on car loan mis-selling. The two are among a number of lenders with motor finance businesses.

Assura jumped 9% after the British healthcare property developer rejected a 1.56 billion pound ($2 billion) proposal from KKR and pension fund Universities Superannuation Scheme.

Engineering firm John Wood Group fell 10.8% to a record low after it forecast a negative cash flow for another year in the previous session.

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(Reporting by Nikhil Sharma; Editing by Mrigank Dhaniwala and Jan Harvey)