FTSE 100 closes higher as defence stocks offset Unilever

(Reuters) -Britain's FTSE 100 edged higher on Tuesday with defence stocks rising after Prime Minister Keir Starmer announced an increase in UK defence spending, while Unilever slipped after CEO Hein Schumacher's surprise exit.

The blue-chip FTSE 100 rose 0.1%, ending a five-session losing streak but still traded near its lowest level in about three weeks.

Defence group BAE Systems gained 4.7% and Rolls-Royce climbed 1.4% after Starmer said he would increase annual defence spending to 2.5% of GDP by 2027 and target a 3% level last seen just after the end of the Cold War in 1989-90.

The increase, to offer Europe more support as the U.S. spearheads peace talks with Russia over its war in Ukraine, would see Britain spending 13.4 billion pounds ($17 billion) more on defence every year from 2027.

Also buoying the FTSE 100 was a 6.1% rise in Smith+Nephew after the medical products maker reported annual sales and profit broadly in-line with expectations.

On the flip side, Unilever shed 1.3% as the consumer goods group surprised investors by ousting chief executive Hein Schumacher and replacing him with finance chief Fernando Fernandez.

Meanwhile, millions of Britons will pay higher energy costs from April after regulator Ofgem said its domestic price cap would rise 6.4% due to soaring wholesale energy prices.

That comes after higher-than-expected inflation figures for January, which raised concerns that the Bank of England (BoE) may be slow in cutting interest rates further this year despite signs of a gloomy economy.

Traders are betting on rate cuts of 57 basis points from the BoE by the end of this year, implying around two 25 bps rate cuts.

The midcap FTSE 250 dipped 0.2%, with CMC Markets dropping 6.2% after the trading platform said finance chief Albert Soleiman would step down.

(Reporting by Ragini Mathur and Sanchayaita Roy in Bengaluru; editing by Mrigank Dhaniwala and Mark Heinrich)