London midday: Stocks pare gains as unemployment drops but wages stall

London stocks had given up earlier small gains by midday on Tuesday as investors digested mixed UK jobs data, although the tone in financial markets was a lot calmer as the Turkish lira steadied.

The FTSE 100 was unchanged at 7,655.94, while the pound was up 0.1% against the dollar and the euro at 1.2787 and 1.1204, respectively, having briefly spiked higher after data showed that UK unemployment fell to a new 43-year low in the three months to June, but wage growth stalled.

Figures from the Office for National Statistics revealed that UK wage growth stalled even as unemployment fell to 4.0% from 4.2% in May. Average weekly pay in the three months from April to June was up 2.4% compared to the three-month period to the end of March, which was down from the 2.5% rate reported a month ago, which economists had expected to be repeated.

Excluding bonuses, average weekly earnings grew 2.7% in the second quarter of the year, as expected by economists, though the first quarter's growth was revised up to 2.8%.

This was in spite of June's ILO unemployment rate for the three months to June dropping to 4.0%, with the number of unemployed people down by 65,000 on the preceding quarter to 1.36m. Employment numbers increased by 42,000 but the employment rate remained unchanged at 75.6%.

Economist Sam Tombs at Pantheon Macroeconomics observed that employment growth was losing momentum, rising only 0.1% in the second quarter after the 0.6% growth in the first.

"What’s more, nearly all surveys of employment intentions have weakened since the start of the year and they now collectively point to year-over-year growth in employee numbers slowing to about 0.8% by the end of the year, from 1.4% in June. Employment, therefore, likely will only keep up with the growing size of the workforce and the unemployment rate shouldn’t fall materially further before the end of this year."

Although the mood in markets was a lot calmer as the Turkish lira stabilised, worries about the potential for contagion from the crisis there remained, with the Indian rupee sinking to a record low and investors keeping a close eye on any related headlines.

Turkish President Erdogan said earlier that the country will boycott electronic products from the US, which has imposed sanctions and lifted tariffs on Turkey in a dispute over the detention of a US pastor.

In corporate news, Esure rallied as it agreed to be bought by private equity firm Bain Capital for 280p a share in cash. The insurer also posted a drop in first-half pre-tax profit, partly on the back of adverse weather-related claims costs.

Debenhams surged as Sports Direct boss Mike Ashley said he was committed to keeping open most of the 59 House of Fraser stores he bought last week. The sports retailer has a near-30% stake in Debenhams.

Neil Wilson, chief market analyst at Markets.com, said: "The indications are that the long-called-for tie-up between Debenhams and HoF is now very much on the cards. As noted last week, a move to effectively consolidate the two troubled department store chains into a single offering looks to be the only viable solution to their problems; combining the operations to reduce overheads and stop competing against each other will prove beneficial."

Plastic piping and ventilation systems manufacturer Polypipe advanced on the back of a resilient first-half performance, while builders merchant Grafton Group edged up after saying it was raising €160m (£144m) through a private placing in the US, with the proceeds set to be used for debt refinancing and general corporate purposes.

Royal Mail fell after Ofcom fined the company £50m for a "serious breach" of competition law, with the regulator finding the postal group had "abused its dominant position" in the letter delivery market.

Antofagasta was under the cosh as interim profits were hit by lower sales tonnages and copper grades alongside higher central costs, although the miner said it expected a better second half.

On the broker note front, Citi replaced Rio Tinto with BHP Billiton on its ‘focus’ list, while Spectris was lifted to ‘add’ at Peel Hunt and Elementis was upgraded to ‘buy’ at Berenberg.

Card Factory was a big faller after it was cut to ‘sell’ at Berenberg.

Market Movers

FTSE 100 (UKX) 7,644.94 0.03%
FTSE 250 (MCX) 20,591.92 0.08%
techMARK (TASX) 3,566.04 0.11%

FTSE 100 - Risers

United Utilities Group (UU.) 753.87p 1.93%
Melrose Industries (MRO) 220.90p 1.89%
Severn Trent (SVT) 2,001.00p 1.57%
Coca-Cola HBC AG (CDI) (CCH) 2,692.00p 1.51%
Reckitt Benckiser Group (RB.) 6,876.00p 1.31%
Burberry Group (BRBY) 2,279.00p 1.29%
GlaxoSmithKline (GSK) 1,569.40p 1.20%
Pearson (PSON) 927.20p 1.16%
DCC (DCC) 7,085.00p 1.14%
Ferguson (FERG) 6,243.00p 1.13%

FTSE 100 - Fallers

Antofagasta (ANTO) 895.40p -6.02%
Fresnillo (FRES) 965.20p -2.25%
Anglo American (AAL) 1,649.20p -1.86%
Prudential (PRU) 1,755.00p -1.63%
Rio Tinto (RIO) 3,768.00p -1.45%
St James's Place (STJ) 1,141.50p -1.30%
TUI AG Reg Shs (DI) (TUI) 1,508.00p -1.21%
Glencore (GLEN) 315.30p -1.13%
Legal & General Group (LGEN) 262.30p -1.09%
Paddy Power Betfair (PPB) 7,047.50p -1.02%

FTSE 250 - Risers

Hill & Smith Holdings (HILS) 1,101.00p 6.48%
Polypipe Group (PLP) 376.60p 6.08%
Elementis (ELM) 268.40p 4.93%
esure Group (ESUR) 277.84p 3.98%
IP Group (IPO) 124.20p 3.16%
Entertainment One Limited (ETO) 352.20p 2.68%
SIG (SHI) 123.90p 2.57%
RHI Magnesita N.V. (DI) (RHIM) 5,110.00p 2.20%
TalkTalk Telecom Group (TALK) 119.20p 2.05%
Stobart Group Ltd. (STOB) 231.12p 1.82%

FTSE 250 - Fallers

Clarkson (CKN) 2,630.00p -4.54%
Card Factory (CARD) 180.10p -4.20%
Cairn Energy (CNE) 241.00p -3.29%
Kaz Minerals (KAZ) 607.00p -3.28%
Thomas Cook Group (TCG) 82.90p -2.81%
TBC Bank Group (TBCG) 1,564.00p -2.49%
Ted Baker (TED) 2,108.00p -2.41%
Capita (CPI) 136.35p -2.22%
Savills (SVS) 807.00p -2.06%
NewRiver REIT (NRR) 263.50p -2.04%