London midday: Stocks slip a little further even as pound drops on jobs data

London stocks fell a little further into the red by midday on Wednesday as the pound dropped after figures revealed that UK unemployment unexpectedly rose at the end of last year, while wage data was mixed.

The FTSE 100 was down 0.2% to 7,233.59, while the pound was 0.6% weaker versus the greenback at 1.3911 and 0.4% lower against the euro at 1.1299. Normally, a weaker pound would benefit the top-flight index, as around 70% of its constituents derive most of their earnings from overseas.

The headline unemployment rate for the three months to December rose to 4.4% from 4.3% a month earlier, at which level it was expected to remain. This was the first increase in the unemployment rate in nearly two years.

The Office for National Statistics also revealed an 88,000 increase in employment change in the period, which was half the 165,000 expected, but that it was a rise in the participation rate that pushed the unemployment rate up.

More timely data on the January claimant count showed a 7,200 decline to 0.823m, versus an expected 4,100 increase.

UK average weekly earnings for the three months to December remained 2.5% higher than the same period a year before for the third consecutive reading, as expected, though it jumped by 2.8% if the month of December was taken alone.

Growth in weekly earnings excluding bonuses rose to 2.5%, higher than the average estimate of 2.4% and the figure for the month before, which was revised down to 2.3%. And private sector pay growth accelerated to 2.6% from 2.3%.

With consumer price inflation at 3.0%, the stubbornly low wage growth means household real incomes continue be squeezed.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The latest labour market data aren’t a decisive blow to the chances of a May rate hike - two more reports will be published before then - but they do reduce the odds."

There are no further data releases of note due but at 1415 GMT, Bank of England governor Mark Carney and other members of the Monetary Policy Committee will appear before the Treasury Select Committee to answer questions on their latest inflation report forecasts and expectations for interest rates going forward.

Investors will also eye the release of the minutes from the FOMC meeting at the end of January.

David Morrison, senior market strategist at GKFX, said: "The market has just about fully priced in the likelihood of three 25 basis point rate hikes in 2018. This brings it in line with the FOMC’s forecast taken from the committee’s Summary of Economic Projections in December last year. However, the recent spike in inflation as measured by the latest CPI and average hourly earnings releases has begun to impact expectations going forward.

"There is growing feeling that the Fed may be in danger of falling behind the curve when it comes to tightening monetary policy. Therefore, there’s growing speculation that tonight’s minutes may indicate a shift towards raising rates by a full percentage point this year - something yet to be priced in by markets."

In corporate news, Lloyds Banking Group rose despite missing expectations on full-year profit, as it announced a £1bn share buyback and increased its annual dividend by a fifth.

Glencore gained after it declared a $2.9bn dividend to be paid out in two equal instalments in 2018 as profits surged higher and it looked confidently to the future.

On the downside, housebuilder Barratt Developments reversed earlier gains despite posting a record first-half profit thanks to strong demand, while roadside assistance and insurance company AA tanked after warning on profits and slashing its dividend.

Metro Bank slumped even as it reported record results and its first annual profit, as underlying pre-tax profit missed expectations, while Unite Group slipped as it launched a £170m placement to fund two near university projects and said pre-tax profit rose 14% in the year t the end of December.

Capital & Counties retreated after saying its Earls Court interests were now valued at 1bn, down from £1.1bn in 2016, and posting a drop in full-year revenues to £87.7m from £94m.

Hochschild Mining was in the red as it reported a drop in full-year earnings on the back of higher costs and increased investment in brownfield exploration, but said production is expected to double this year.

FirstGroup tumbled after saying annual earnings are expected to be slightly lower, while Polymetal ticked down as it signed its first offtake contract for Kyzyl concentrate.

In broker note action, BT was upgraded to 'hold' at Deutsche Bank, while 3i Infrastructure was lifted to 'buy' at Jefferies.

HSBC was cut to 'hold' by Societe Generale and Dunelm was downgraded to 'equalweight' from 'overweight' by Barclays.

Market Movers

FTSE 100 (UKX) 7,233.59 -0.18%
FTSE 250 (MCX) 19,688.62 -0.58%
techMARK (TASX) 3,323.68 -0.44%

FTSE 100 - Risers

Glencore (GLEN) 398.50p 3.67%
Lloyds Banking Group (LLOY) 69.17p 1.95%
G4S (GFS) 264.60p 1.53%
TUI AG Reg Shs (DI) (TUI) 1,561.50p 1.23%
Relx plc (REL) 1,509.50p 1.11%
Severn Trent (SVT) 1,727.50p 0.93%
HSBC Holdings (HSBA) 743.30p 0.85%
ITV (ITV) 172.71p 0.79%
Paddy Power Betfair (PPB) 8,460.00p 0.71%
Anglo American (AAL) 1,750.20p 0.60%

FTSE 100 - Fallers

Shire Plc (SHP) 2,965.50p -3.48%
Standard Life Aberdeen (SLA) 372.54p -2.43%
WPP (WPP) 1,368.00p -2.29%
Fresnillo (FRES) 1,315.50p -1.86%
BHP Billiton (BLT) 1,465.60p -1.66%
Micro Focus International (MCRO) 2,036.00p -1.45%
3i Group (III) 905.40p -1.29%
Smurfit Kappa Group (SKG) 2,608.00p -1.21%
British Land Company (BLND) 640.00p -1.17%
Kingfisher (KGF) 357.40p -1.11%

FTSE 250 - Risers

Equiniti Group (EQN) 288.50p 3.59%
Fidessa Group (FDSA) 3,690.49p 3.38%
SSP Group (SSPG) 625.50p 2.46%
Homeserve (HSV) 734.00p 2.09%
Brown (N.) Group (BWNG) 201.20p 1.98%
Purecircle Limited (DI) (PURE) 440.00p 1.85%
NewRiver REIT (NRR) 310.00p 1.64%
Sirius Minerals (SXX) 24.40p 1.50%
RHI Magnesita N.V. (DI) (RHIM) 4,320.00p 1.41%
Daejan Holdings (DJAN) 5,840.00p 1.39%

FTSE 250 - Fallers

AA (AA.) 90.44p -22.24%
FirstGroup (FGP) 83.25p -13.33%
Metro Bank (MTRO) 3,374.00p -6.54%
Hochschild Mining (HOC) 210.00p -4.59%
TalkTalk Telecom Group (TALK) 96.65p -4.02%
Stagecoach Group (SGC) 130.03p -3.61%
Inmarsat (ISAT) 461.70p -3.55%
Capital & Counties Properties (CAPC) 270.90p -2.87%
TBC Bank Group (TBCG) 1,634.00p -2.74%
Greencore Group (GNC) 182.60p -2.61%