London midday: Stocks extend gains as UK unemployment rate drops, wage growth slows

London stocks had extended gains by midday on Tuesday as investors digested UK jobs data and the latest developments in the Sino-US trade spat.

The FTSE 100 was up 0.8% at 7,223.67 as data from the Office for National Statistics showed that the UK unemployment rate ticked down to 3.8% in the three months to March from 3.9%, marking its lowest level since the end of 1974. Meanwhile, wages continued to grow, but at a slightly slower pace.

Excluding bonuses, average weekly earnings were estimated to have increased 3.3%, or by 1.3% after adjusting for inflation, compared to a year earlier. That was a marginal fall on the previous month's reading of 3.4%. Including bonuses, wages grew by 3.2%, down from 3.5%.

Ben Brettell, senior economist at Hargreaves Lansdown, called the UK labour market “remarkably resilient” given the uncertainty over Brexit.

"These are really strong numbers, given the headwinds the economy is currently facing. But the British disease of low productivity is a spectre which continues to haunt us. There are valid concerns that UK firms are hoarding labour instead of much-need capital expenditure."

Sterling pared some of its losses after the data, although the general consensus was that the currency will be dominated by Brexit news, more specifically the lack of any progress in cross-party talks.

"As Brexit talks go nowhere and Nigel Farage rampages through the polling figures, it is clear that political instability is now a given for the UK," IG chief market analyst Chris Beauchamp.

The pound was flat against the dollar at 1.2954 and 0.1% lower versus the euro at 1.1536.

More broadly, the trade spat between the US and China failed to dent the mood, even after stocks on Wall Street tumbled on Monday as China retaliated against US President Trump's lifting of tariffs by announcing tariffs on $60bn of US goods. Both the Dow and the S&P 500 endured their worst day since 3 January.

But investors appeared to be betting that a deal will be struck after US President Trump reportedly said at a White House event on Monday that talks between the two nations were likely to be successful.

Commenting on Treasury Secretary Steven Mnuchin's return from trade talks in China, Trump said: "He just got back from China. We’ll let you know in about three or four weeks whether or not it was successful…But I have a feeling it’s going to be very successful."

Also helping to prop up sentiment was news that Trump is prepared to meet his Chinese counterpart Xi Jinping at a G20 summit in Japan next month.

"President Trump’s more conciliatory tone has offered confidence that any escalation in the short term is likely to be limited, while both sides consider their next moves," said CMC Markets analyst Michael Hewson.

Trump took to Twitter again earlier with more talk about trade.

"China buys MUCH less from us than we buy from them, by almost 500 billion dollars, so we are in a fantastic position. Make your product at home in the USA and there is no tariff. You can also buy from a non-tariffed country instead of China. Many companies are leaving China…so that they will be more competitive for USA buyers. We are now a much bigger economy than China, and have substantially increased in size since the great 2016 Election. We are the 'piggy bank' that everyone wants to raid and take advantage of. NO MORE!"

In equity markets, Spirax-Sarco rallied ahead of its inclusion in an MSCI index series, while DCC gained after it said annual pre-tax profit rose 3.3% as acquisitions helped the sales and support services group overcome mild weather that affected its heating businesses.

FTSE 250 baker Greggs saw its shares rally as it said sales and underlying profits for 2019 will be "materially higher" than it had expected, helped by strong demand for its vegan sausage rolls. In an update for the first 19 weeks of the year, the group said total sales were up 15.1% versus 4.7% growth in 2018, while company-managed shop like-for-like sales were 11.1% higher compared to 1% growth in 2018.

Vodafone was well off earlier highs but clinging on to positive territory as it cut its full-year dividend to 9 cents a share from 15 and said it swung to an annual loss of €7.6bn from a profit of €2.8bn the year before. Revenue at the company fell 6.2% to €43.7bn.

Richard Hunter, head of markets at Interactive Investor, argued that while there is "a long list of reasons to be uncheerful" about the results, there are also grounds for optimism over Vodafone's ambitions.

"The reduction to the dividend is prudent, given the enormous constraints on cash flow, not to mention that dividend cover had slipped to unsustainable levels. Even after the cut, the yield will remain punchy and the group has committed to returning to a progressive policy."

EI Group fizzed higher after the pub operator reported a rise in interim underlying pre-tax profit, while Standard Life Aberdeen gained ground as it posted a 3% increase in assets under management and administration as at 31 March 2019 to £568.9bn, helped by positive market movements.

On the downside, shares in Renishaw tumbled as the metrology and healthcare technology group said pre-tax profits for the nine months to-end March 2019 fell 18.8%, while Landsec retreated as it said a "significant" drop in the value of its retail assets led to wider full-year pre-tax losses.

Market Movers

FTSE 100 (UKX) 7,223.67 0.84%
FTSE 250 (MCX) 19,313.99 0.98%
techMARK (TASX) 3,492.47 0.36%

FTSE 100 - Risers

Spirax-Sarco Engineering (SPX) 8,401.65p 4.24%
Evraz (EVR) 577.80p 3.85%
DCC (DCC) 6,674.00p 2.90%
Antofagasta (ANTO) 823.00p 2.47%
Fresnillo (FRES) 743.07p 2.35%
Glencore (GLEN) 277.90p 2.28%
Just Eat (JE.) 667.00p 2.21%
Informa (INF) 771.00p 2.20%
Kingfisher (KGF) 244.80p 2.04%
Anglo American (AAL) 1,902.00p 2.04%

FTSE 100 - Fallers

Land Securities Group (LAND) 878.40p -1.55%
Rentokil Initial (RTO) 376.80p -1.26%
easyJet (EZJ) 1,004.00p -1.23%
Imperial Brands (IMB) 2,154.00p -0.81%
Ocado Group (OCDO) 1,310.50p -0.68%
Paddy Power Betfair (PPB) 5,850.00p -0.58%
Compass Group (CPG) 1,724.65p -0.34%
Unilever (ULVR) 4,635.50p -0.30%
British Land Company (BLND) 562.55p -0.19%
SSE (SSE) 1,113.00p -0.18%

FTSE 250 - Risers

Greggs (GRG) 2,041.41p 14.05%
Metro Bank (MTRO) 510.24p 7.42%
Euromoney Institutional Investor (ERM) 1,374.00p 7.18%
Amigo Holdings (AMGO) 238.00p 5.78%
EI Group (EIG) 221.20p 5.33%
Kier Group (KIE) 336.40p 4.54%
Centamin (DI) (CEY) 91.51p 4.41%
Ferrexpo (FXPO) 217.10p 3.68%
Wetherspoon (J.D.) (JDW) 1,337.00p 3.64%
Premier Oil (PMO) 89.44p 3.54%

FTSE 250 - Fallers

AJ Bell (AJB) 410.00p -7.87%
Renishaw (RSW) 3,864.00p -6.53%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 110.60p -0.90%
Shaftesbury (SHB) 862.50p -0.86%
IG Group Holdings (IGG) 491.50p -0.85%
Hilton Food Group (HFG) 1,032.00p -0.77%
Restaurant Group (RTN) 134.70p -0.66%
HGCapital Trust (HGT) 2,127.60p -0.35%
Apax Global Alpha Limited (APAX) 148.50p -0.34%
BBGI SICAV S.A. (DI) (BBGI) 158.50p -0.31%