UK shares flat as investors weigh corporate earnings and middle east truce

• FTSE 100 flat, FTSE 250 inches up 0.1%
• Babcock gains after upgrading outlook on defence spending boost
• Burberry rises 6% after HSBC lifts target price
• Surveys show a cooling labour market
• Liontrust Asset Management slumps on dropped annual profit

June 25 (Reuters) - London's main stock indexes were mostly flat on Wednesday as investors digested a batch of corporate earnings and kept a cautious eye on the shaky truce between Israel and Iran.

The blue-chip FTSE 100 .FTSE was flat by 1022 GMT, while the mid-cap FTSE 250 .FTMC added 0.1% and hovered near a two-week high.

Global markets had rallied earlier in the week after a ceasefire between Iran and Israel brought an end to a 12-day air war between the two-arch rivals. However, caution loomed as Washington said talks with Tehran for a long-term peace deal were "promising."

Markets were now focused on a fresh set of corporate results. Defence engineering company Babcock BAB.L topped the blue-chip index with a 13.3% gain after upgrading its medium-term guidance as it expects to benefit from boosted defence spending.

Fellow defence names Rolls-Royce RR.L and Bae Systems BAES.L gained 1.7% and 0.9%, respectively. The broader sector .FTNMX502010 is one of the best performing on the FTSE so far this year.

Defence stocks were further buoyed as Britain announced plans to acquire twelve F-35A fighter jets capable of deploying tactical nuclear weapons during the NATO summit, where member nations committed to increased defence expenditure.

Meanwhile, gains on the sectoral charts were led by the personal goods .FTNMX402040 index, with heavyweight Burberry BRBY.L rising 5.6% after brokerage HSBC raised the luxury brand's target price.

Halford's HFD.L gave up early declines and was last up 1% as traders were focused on the bicycle and car products retailer's underlying pre-tax profit that surpassed expectations.

On the flipside, Wealth manager Liontrust Asset Management LIO.L fell 7.7% to the bottom of the small-cap index after reporting a drop in annual profit due to tariff-related market volatility.

Labour market data showed cooling conditions , with pay growth lagging inflation and job vacancies dropping - metrics central to policy decisions.

On Tuesday, Bank of England Governor Andrew Bailey pointed to signs of a softer labour market and said interest rates were likely to keep falling.

Among others stocks, WPP WPP.L slid 2.6% after Barclays downgraded the advertising giant, citing recent management changes.