UK unemployment has climbed to its highest level in five years while wage growth continued to ease, strengthening expectations that the Bank of England will resume cutting interest rates in the coming months.

Official figures from the Office for National Statistics show the jobless rate rose to 5.2 per cent in the three months to December, up from 5.1 per cent in the previous rolling quarter. Unemployment has been edging higher since 2022, reflecting a steady cooling in the labour market.

At the same time, average earnings excluding bonuses increased by 4.2 per cent year-on-year, down from 4.5 per cent in November and in line with economists’ forecasts.

The slowdown comes against a backdrop of higher labour costs following the chancellor’s £25bn rise in employer national insurance contributions introduced in October 2024, alongside increases in the national living wage.

Younger workers appear to be disproportionately affected. Payroll data show that employment among those aged 34 and under has fallen by 242,000 since mid-2024, when overall payroll numbers peaked. By contrast, employment among workers aged 35 and over has risen by 71,000.

Martin Beck, chief economist at WPI Strategy, said higher labour costs were weighing most heavily on entry-level hiring. “At the same time, firms are likely reassessing junior roles in the face of rapid advances in AI,” he added.

The softening labour market has reinforced market bets that the Bank of England will cut rates from their current level of 3.75 per cent. According to Bloomberg data, traders are now pricing in a roughly 76 per cent chance of a rate reduction at the next meeting in March.

Paul Dales, chief UK economist at Capital Economics, said the data supported the view that policymakers have “at least a couple more interest rate cuts in their locker”, with the probability of a March move increasing.

At its most recent meeting, the Bank’s monetary policy committee voted 5–4 to hold rates steady, a closer split than anticipated by analysts. Governor Andrew Bailey has since indicated that further policy loosening remains possible this year.

Yael Selfin, chief economist at KPMG, said the latest figures would reassure rate-setters that pay pressures are easing. “The MPC will take comfort from evidence that the labour market continues to soften,” she said.

Wednesday’s inflation figures will be closely watched. Economists expect the consumer prices index to fall to 3 per cent in January, down from 3.4 per cent in December, driven by lower airfares, easing food prices and slower energy inflation. That would mark the lowest reading since March 2025.

Stephen Kinnock, a health minister, pointed to recent job creation and economic growth, saying the UK had delivered the strongest growth among G7 European economies last year. He added that government initiatives were under way to support employment and apprenticeships.

However, business groups argue that recent employment reforms have made hiring more costly and risky. Alex Hall-Chen of the Institute of Directors said unemployment reaching 5.2 per cent underlined the fragility of the jobs market.

“The best way to boost employment is to make it less risky and less costly for businesses to hire staff,” she said, calling for adjustments to the Employment Rights Act and exemptions for small and medium-sized enterprises.

Jonathan Moyes, head of investment research at Wealth Club, said the alignment of weaker job growth and moderating wages could shift the Bank’s stance. “Wage growth has been the last domino holding back rate cuts,” he said. “Now both employment and wages are weakening, the case for further easing strengthens.”

For policymakers, the message from the data is clear: the labour market is losing momentum, and the balance of risks may now tilt towards supporting growth rather than restraining inflation.

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Topshop is making a nationwide return to bricks-and-mortar retail, launching in 32 John Lewis stores in its most significant high street comeback since the collapse of Arcadia Group in 2020.

The relaunch, which also sees Topman stocked in seven John Lewis locations, marks the first time in four years that the brand has returned to physical retail at scale.

Topshop’s original Oxford Street flagship was once a defining force in British fashion, famously drawing crowds when Kate Moss launched her collection in 2007. Its revival within John Lewis stores aims to recapture some of that cultural resonance.

After Arcadia entered administration, Topshop was acquired by Asos, which later sold a 75 per cent stake in the brand to Heartland, the investment arm of Danish billionaire Anders Holch Povlsen, founder of Bestseller.

Historically associated with shoppers aged 16 to 24, Topshop now returns via a retailer traditionally known for appealing to an older demographic. John Lewis said the move is designed to broaden its appeal to younger consumers while reconnecting with millennials who grew up with the brand.

The department store chain has been rebuilding its position after years of intense competition from rivals such as Marks & Spencer, a pandemic-driven shift towards online shopping and previous expansion missteps that left it with excess retail space.

Under a new leadership team, John Lewis has pursued a back-to-basics strategy, focusing on customer service, reintroducing its “never knowingly undersold” pledge and investing heavily in its in-store experience.

The Topshop relaunch coincides with London Fashion Week and features around 130 pieces across denim, tailoring, outerwear and wardrobe staples. Signature styles such as the Jamie and Joni jeans return alongside updated designs. Cara Delevingne fronts the new campaign.

Peter Ruis, managing director of John Lewis, described the partnership as a significant step in its fashion strategy. “To be the exclusive home of an iconic brand like Topshop signals our ambition to be the definitive style authority on the British high street,” he said.

Michelle Wilson, managing director of Topshop, said the partnership would bring the brand back to high streets across the UK “with the level of service our customers expect”.

The relaunch forms part of a wider £800m multi-year investment by John Lewis, which includes refurbishments of key stores, notably its Oxford Street flagship, and the introduction of 14 new fashion brands across womenswear and menswear.

For Topshop, the move represents a symbolic return to physical retail. For John Lewis, it is a calculated bet that brand nostalgia and refreshed fashion credentials can help reignite footfall on Britain’s struggling high streets.

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Australia’s share market has clutched a second session of gains, led by a strong performance from mega miner BHP, which helped offset weak performances elsewhere.

The S&P/ASX200 edged 21.8 points higher on Tuesday, up 0.24 per cent, to 8,958.9, as the broader All Ordinaries rose 18.7 points, or 0.2 per cent, to 9,182.5.

“With US markets closed overnight for Presidents Day and several Asian markets shut for Lunar New Year, local earnings have taken centre stage – and BHP has comfortably stolen the show,” IG market analyst Tony Sycamore said.

“BHP delivered a blockbuster first-half result, sending its share price up more than 7.5 per cent to a record high of $54.20, before easing back to close 4.7 per cent higher at $52.74.”

The move added an extra $11 billion to the miner’s market cap, taking it to a valuation of $267 billion.

Mining giant BHP has helped push the Australian stock market higher. (Susie Dodds/AAP PHOTOS)

Only four of 11 local sectors ended the day higher, led by a 1.3 per cent boost to raw materials thanks largely to BHP, as gold miners retreated and other sub-sectors were mixed.

Gold itself eased to $US4,898 (A6,937) an ounce, as US dollar strength and risk-on sentiment weighed on the safe haven.

The heavyweight financials sector traded just below flat as Westpac carved out a 0.3 per cent lift and its remaining big four competitors fell behind.

NAB shares fell 0.4 per cent ahead of its first-quarter results announcement on Wednesday.

Energy stocks dipped 0.4 per cent, tracking with a similar move in oil prices ahead of more US-Iran talks over the latter’s nuclear program.

Elsewhere in the segment, coal miners traded lower and uranium stocks were mixed.

Consumer discretionary stocks had a positive day, up 0.5 per cent, with help from JB Hi-Fi after it’s share price jumped by roughly one-fifth in two sessions since reporting a 7.4 per cent sales jump in the recent half.

In other earnings news, Seek fell more than three per cent after it reported a $178 million loss, due in part to an impairment on its stake in Chinese jobs platform Zhaopin.

Shares in Baby Bunting Group rocketed more than eight per cent higher after the maternity and baby goods company posted a 44 per cent increase in first-half underlying net profit compared to the prior corresponding period.

The Lottery Corporation, Suncorp, NAB, Mirvac and GrainCorp will hand down interim results on Wednesday.

The Australian dollar is buying 70.62 US cents, down from 70.88 US cents on Monday at 5pm, dipping slightly following the release of the Reserve Bank’s February meeting minutes.

“While the board cited stronger activity, resilient consumer spending and persistent price pressures as justification for February’s tightening, the absence of a pre-set rate path has kept the currency subdued,” Zerocap analyst Emir Ibrahim said.

“Attention now shifts to this week’s wage price index and labour market data for confirmation on whether domestic strength is sufficient to sustain the RBA’s hawkish bias.”

ON THE ASX:

* The S&P/ASX200 rose 21.8 points, or 0.24 per cent, to 8,958.9

* The broader All Ordinaries gained 18.7 points, or 0.2 per cent, to 9,182.5

CURRENCY SNAPSHOT:

One Australian dollar trades for:

* 70.62 US cents, from 70.88 US cents at 5pm AEDT on Monday

* 108.01 Japanese yen, from 108.58 Japanese yen

* 59.64 euro cents, from 59.73 euro cents

* 51.90 British pence, from 51.96 British pence

* 117.06 NZ cents, from 117.42 NZ cents

Mumbai: Wealth managers and strategists have one message for investors sitting on hefty gains from the tearaway rally in gold and silver: take money off the table. With both the precious metals having more than doubled in the past 18 months in a record-breaking run-up, pulling in a wave of new investors, the risk-reward may be stretched to hold an outsized bet, they said.

“If you bought gold and silver over the past year and a half, this is the time to take profits and be a fence sitter,” said Sahil Kapoor, head – Products, and market strategist, DSP Mutual Fund.

Over the past 18 months, gold has been up 101% in dollar terms and 116% in rupee terms. Silver has surged 167% in dollar terms and 198% in rupee terms.

While international silver has dropped 36.63% and gold is down 7.8% from their recent lifetime highs in January 2026, the lower prices may not warrant major fresh allocations at this juncture.

“Precious metals are priced to perfection after the sharp run-up in prices we saw over the last couple of years,” said Akshay Chinchalkar, managing partner and head of strategy, The Wealth Company. Chinchalkar recommends waiting for a “big crack” before deploying lump-sum funds and prefers that investors use Systematic Investment Plans (SIPs) – a staggered form of deployment – to build gold exposure.

Gold and silver have rallied mainly on safe-haven demand, driven by simmering geopolitical tensions, aggressive US trade policies, inflationary pressures and sustained central-bank buying. Silver’s surge, however, goes beyond its role as a store of value: the metal’s expanding industrial demand – from solar panels and electric vehicles to AI-related technologies that have seen swelling investment in recent years – has also fuelled its rise.
The strong rally prompted Indian investors, deprived of gains in equities here, to pump record sums over the past couple of months. Monthly inflows into gold and silver schemes topped equity funds for the first time in January. Precious-metal ETFs drew ₹33,503 crore during the month – more than double December’s ₹15,600 crore and higher than ₹24,029 crore into equity schemes. Flows into equity mutual funds dipped 14% in January from the previous month. Investors would be better off not crowding into these products, said strategists.

“New investors should not enter with large weights or allocate fresh funds at this time. At best, to avoid FOMO (Fear of Missing Out), start a token SIP, if you can’t control your urge to participate,” said Kapoor.

The recent surge in select public sector stocks has sparked fresh debate about whether the rally is sustainable or merely a short-term burst driven by liquidity. While defence and power continue to draw interest, experts remain cautious on oil and gas and structurally wary of long-term prospects in IT.

A sharp move in Engineers India has been one of the talking points, with the stock posting strong gains over consecutive sessions. Market expert Dharmesh Kant from Cholamandalam Securities noted that the recent action appears more technical than fundamental.

“This is just some MNC brokerage report and some buying. Small buying can spurt the stock price and there are no sellers. We are not interested in the space because exploration and production of oil and gas is headed for a sunset over the next 10-15 years. Trades can happen in between, but long-term traction cannot be built on yesterday’s stock price action.”

Defence Emerges as a Preferred PSU Theme

Defence remains a standout theme for long-term investors. Kant highlighted that execution concerns are overstated, given robust order books and improving delivery timelines.

“The only space which looks attractive to me is defence. Execution issues are not a problem. Hindustan Aeronautics has a robust order book, and Q3 numbers exceeded expectations. Over the next two-three years, these companies will surprise on execution and margins. HAL could post 32-33% operating margin with 15-20% revenue and PAT growth. Defence is a play we like. Power is another—projects are commissioning and FY27 PAT growth could be 30-33%.”
Order Books Seen as Strength
Large defence order books provide predictable revenue streams. Kant explained:
“Order books are given by the Government of India and ensure better revenue and profitability. BEL’s PAT grew 20% this quarter. Execution cannot exceed 15-17% in any capital goods company, and they are delivering. Concerns about large order books are misplaced.”
IT: Tactical Opportunity, Structural Concerns
On the technology front, short-term trading opportunities exist, but structural growth challenges remain:

“Indian IT companies’ contribution in Nifty 50 earnings dropped from 22% in FY20 to 11% in FY25. Growth has lagged due to multiple factors. There could be a bounce in the next two to four months as Q3/Q4 numbers come in, but from a long-term perspective, we do not recommend IT stocks.”

The Bottom Line
Investors are urged to differentiate between tactical momentum and structural opportunity. Defence and power offer visibility backed by policy and execution, oil and gas exploration faces headwinds, and IT presents short-term trading potential but long-term uncertainty.