UK equities gained on Thursday, buoyed by a fall in government bond yields after the latest economic data showed the British economy was in recession, building the case for the Bank of England to ease its monetary policy.

The exporter-heavy FTSE 100 and the mid-cap FTSE 250 index rose 0.3% each, as of 0846 GMT.

Data showed Britain's economy entered a recession in the second half of 2023 after it shrank by a worse-than-expected 0.3% in the three months to December. It also contracted by 0.1% between July and September.

Additionally, shares were supported by a fall in the 10-year UK gilt yield after the data, last standing at 3.998%.

“The data is evident of deflated activity across all key sectors of the economy, from manufacturing to service and retail,” said Jeremy Batstone-Carr, European strategist at Raymond James Investment Services.

"The lagged impact of high inflation and interest rates will work its way through the economy, allowing the Bank of England to lower the base rate come summertime.”

Money markets raised their bets of an interest rate cut from the BoE, now pricing in about 75 basis points (bps) of cuts this year, compared with about 70 bps before the data.

Among single stocks, Close Brothers Group dropped 13.3% and was among the top losers on the midcap index as the lender said it would not pay dividends for the current financial year.

RELX added 1.6% and notched a record-high after the information-and-analytics group, which reported a 13% growth in adjusted operating profit, said it expected to see another strong performance this year.

Meanwhile, shares of oil majors BP, Shell and cigarettes maker Imperial Brands shed between 1.3% and 4.0% as the stocks traded ex-dividend. (Reporting by Shristi Achar A in Bengaluru; Editing by Rashmi Aich and Janane Venkatraman)