UK's FTSE 100 ends lower as oil, defence stocks weigh

Dec 16 (Reuters) - London's FTSE 100 closed lower on Tuesday, hurt by losses in energy and defence stocks, while investors assessed fresh jobs data that reinforced expectations for an interest rate cut by the Bank of England later in the week.

The UK's blue-chip FTSE 100 .FTSE closed down at 0.7%, while the midcap FTSE 250 .FTMC index was largely unchanged.

Energy stocks .FTNMX601010 extended losses and dropped 3%, tracking a steep fall in oil prices as prospects for a Russia-Ukraine peace deal appeared to improve, raising expectations of a potential easing of sanctions.

The Aerospace and Defence index .FTNMX502010 also moved lower, down 1.6% amid talks of a potential peace deal. Britain's biggest listed defence companies - BAE Systems BAES.L and Babcock BAB.L - were down 1.9% and 4.1%, respectively.

U.S. officials said on Monday that Ukraine could receive security guarantees modelled on NATO's Article 5 mutual defence pledge under a proposed peace deal with Russia.

Banks .FTNMX301010 were also a drag, down 0.7%, while media-focussed stocks .FTNMX403010 declined 1.7%.

Sterling GBP= strengthened 0.4% against the dollar, hitting its highest level in two months ahead of the BoE's decision on Thursday, exerting pressure on export-oriented domestic companies.

Britain's unemployment rate hit its highest level since the start of 2021 and private sector pay growth was the weakest in nearly five years in the run-up to finance minister Rachel Reeves' annual budget last month.

The weak jobs data added to expectations that the British central bank will cut rates on Thursday to support a faltering economy.

On the flip side, precious metals and miners .FTNMX551030 jumped 2.4%, boosted by gold prices. A U.S. jobs report showing the unemployment rate rose last month from September reinforced bets of rate cuts by the U.S. Federal Reserve and sent the dollar index lower.

Airline stocks benefited from lower crude prices, with EasyJet EZJ.L up 3.4%. The broader travel and leisure index .FTNMX405010 gained 0.77%.

IG Group IGG.L jumped 8.1% after the online trading platform said it expects to deliver revenue growth around the mid-point of its guided range in 2026. The stock lifted the IB and brokerage services index .FTNMX302020 by 1.5%.

Serica Energy SQZ.L rose 5.3% after the company said it had agreed to acquire a portfolio of Southern North Sea assets from Spirit Energy.