UK stocks gain on financial, defence boost amid tariff relief

(Reuters) -Britain's main indexes surged on Tuesday, led by financial and defence stocks, after U.S. President Donald Trump signalled possible exemptions on auto-related levies and investors assessed job market data for monetary policy insights.

The blue-chip FTSE 100 index was up 1.4% and the midcap index gained 1.5%.

Trump on Monday indicated he was considering adjusting the 25% tariffs on foreign auto and auto parts imports from Mexico, Canada and other regions. This followed Friday's exemption of smartphones, computers and other electronics from his "reciprocal" tariffs.

After recent market selloffs, investors seized on the positive news, pushing shares higher for the second consecutive session.

Investment banking and brokerage service shares led gains, rising 4.5%, with investment firm 3I group topping the FTSE 100 with a 6.1% jump after Citigroup raised its price target on the stock.

The aerospace and defence index climbed 2.9%, with Rolls Royce rising 3% after the Pentagon named Rolls-Royce Solutions America as the principal contractor for a potential sale of Eitan PowerPack engines to Israel.

B&M was among the top performers on the midcap index, up 5.7%, after the discount retailer forecast annual profit above the midpoint of its outlook range.

Tate & Lyle rose 6.2% after the food ingredients maker said it expects 2025 results to be in line with guidance.

On the data front, Britain's labour market weakened ahead of this month's tax hike on employers, but wage growth remained strong, complicating the job for the Bank of England, which is also expecting an economic hit from U.S. trade tariffs.

Investors were pricing a more than 90% probability on the BoE cutting rates by a quarter of a percentage point on May 8.

(Reporting by Ragini Mathur in Bengaluru; Editing by Tasim Zahid and Devika Syamnath)