By Shivani Kumaresan and Amal S
(Reuters) - UK stocks closed higher on Tuesday, bucking the trend in Europe as optimism around an economic recovery led by plans to ease restrictions in Britain offset a spike in the domestic unemployment rate.
After falling as much 1.7%, the commodity-heavy FTSE 100 ended 0.2% higher after British Prime Minister Boris Johnson said he was very optimistic that all COVID-19 restrictions in England would end on June 21.
The mid-cap FTSE 250 gained 0.4%.
"The announcement has given market an extra confidence that the economy will be starting to move back into normalcy progressively over the next few months and shares of travel companies and banks are benefiting from that," said Chris Bailey, strategist at Raymond James.
British Airways owner IAG (LON:ICAG) gained 2.0%, while easyJet (LON:EZJ), Wizz Air and Cineworld gained between 1.8% and 9.5%.
Summer holiday bookings surged by as much as 600% after Britain laid out plans to gradually relax coronavirus restrictions.
HSBC Holdings Plc (LON:HSBA) edged up 0.8%, alongside other banking stocks, despite lowering its long-term profitability target.
Barclays (LON:BARC) and Lloyds Banking Group (LON:LLOY) rose 3.1% and 2% respectively.
A raft of global stimulus has helped the FTSE 100 recover about 35% from a coronavirus-driven crash last year, but it has lagged its European peer on worries about the economic damage from prolonged lockdowns. More recently, fears of rising inflation have hit equities worldwide.
Britain's jobless rate rose to 5.1% in the last three months of 2020, its highest in nearly five years but still lower than it would have been without a huge coronavirus jobs support scheme that finance minister Rishi Sunak looks set to extend next week.