London midday: Stocks fall further amid growing trade fears; UK jobs data in focus
London stocks had fallen further into the red by midday on Tuesday as UK jobs data was overshadowed by news that China is set to ask the World Trade Organization for permission to slap sanctions on the US.
The FTSE 100 was down 0.6% to 7,236.26, while the pound was up 0.1% against the dollar at 1.3032, off earlier highs but holding on to the gains made after the EU's chief Brexit negotiator, Michel Barnier, said on Monday that a deal was possible in six to eight weeks.
Against the euro, sterling was 0.1% firmer at 1.1244.
China plans to ask for permission to impose sanctions on the US next week, according to the WTO's meeting agenda. The request - which follows US President Trump's latest threat to impose tariffs on a further $267bn of Chinese goods, on top of the $200bn already planned - relates to non-compliance by the US with a ruling in a dispute over dumping duties.
"This news immediately sparked fears that the next round of trade war-escalation isn’t far off," said Spreadex analyst Connor Campbell.
Data released earlier by the Office for National Statistics showed UK wage growth strengthened to a three-year high in the three months to July, but employment increased at a slower rate, with economists seeing little chance of the Bank of England raising rates again soon.
UK average earnings in the three months to July increased 2.6% compared to the same period last year, up from growth of 2.4% a month ago. Economists had expected growth to remain at 2.4%, with the latest CPI reading showing that inflation is currently running at 2.5%.
Excluding bonuses, wage growth accelerated to 2.9% from 2.7% and beating the market's forecast of 2.8%. For the single month of July, pay was up 3.1% on a year ago, a high last seen in July 2015 and the joint highest since 2008.
The ILO unemployment rate remained at 4.0% for the three month period, as expected, though employment increased by just 3,000 to 32.4m compared to the previous 42,000 increase. The small increase, which was due to a fall in the employment of women by 28,000 to 15.23m, dragged down annual growth in employment to 0.8% from 1.0%.
In more timely data, the ONS revealed that in August the claimant count increased by 8,700, down from a revised figure of 10,000 for July. The seasonally adjusted claimant count rate increased to 2.6% from 2.5%.
Oanda's Craig Erlam said moves in the pound in the aftermath of the data were not warranted, after it shot up but then quickly pared gains.
Erlam said the jobs report itself paints a much better picture of the UK economy than many people generally have, with unemployment standing at its lowest since March 1975 and wage growth nearing its highest levels since the financial crisis.
"While these levels are still well below what we were seeing prior to a decade ago, they’re certainly supportive of the Bank of England’s policy of gradually raising interest rates when taken in isolation and the jump in earnings further aids this which is why we saw a bump in sterling. The flip side of this is the one-off factors that are likely contributing to the gains, rather than them being entirely organic and a result of a tight and competitive labour market, not the mention the uncertainty and risk with regards to the outlook."
In corporate news, Elementis slumped even though it cut the up-front price of its acquisition of industrial talc group Mondo Minerals by $100m after the deal was poorly received by investors.
Oil producer Cairn Energy was in the red as it reported first-half pre-tax losses of £383m, while Anglo American slipped after saying the value of rough diamond sales at its De Beers unit fell in the seventh cycle of 2018 to $505m from $533m in the sixth.
Going the other way, equipment rental firm Ashtead was the top gainer after saying it would increase and extend its share buyback plans after a strong first quarter of its financial year.
Retailer JD Sports Fashion ticked higher as it posted a rise in interim pre-tax profit and revenue despite a "challenging" backdrop.
Sanne Group, the provider of alternative asset and corporate administration services, advanced as it lifted its interim dividend and said it remains confident of meeting full-year expectations despite a drop in half-year profits.
Hilton Food was in the green as it posted a jump in interim profit and revenue, boosted by the first full inclusion of the Seachill business, recovery of the business in Central Europe and further strategic progress in Australia.
In broker note action, BP was initiated at ‘buy’ and Royal Dutch Shell was started at ‘hold’ by Berenberg, while JD Wetherspoon was lifted to ‘buy’ by the same outfit.
Cineworld was upped to ‘buy’ from ‘hold’ by HSBC and Premier Oil was upgraded to ‘buy’ from ‘hold’ at Investec.
Market Movers
FTSE 100 (UKX) 7,236.26 -0.59%
FTSE 250 (MCX) 20,166.49 -0.46%
techMARK (TASX) 3,440.22 -0.11%
FTSE 100 - Risers
Ashtead Group (AHT) 2,379.00p 4.34%
Shire Plc (SHP) 4,334.00p 1.62%
Coca-Cola HBC AG (CDI) (CCH) 2,550.00p 0.79%
Rightmove (RMV) 482.75p 0.57%
AstraZeneca (AZN) 5,733.00p 0.53%
Paddy Power Betfair (PPB) 6,830.00p 0.52%
NMC Health (NMC) 3,674.00p 0.44%
British Land Company (BLND) 620.40p 0.36%
SEGRO (SGRO) 651.90p 0.35%
Rentokil Initial (RTO) 321.90p 0.28%
FTSE 100 - Fallers
Fresnillo (FRES) 789.20p -2.86%
British American Tobacco (BATS) 3,570.50p -2.27%
Anglo American (AAL) 1,436.00p -1.95%
Imperial Brands (IMB) 2,648.00p -1.87%
BHP Billiton (BLT) 1,487.60p -1.78%
Associated British Foods (ABF) 2,217.67p -1.74%
Randgold Resources Ltd. (RRS) 4,641.00p -1.69%
Royal Bank of Scotland Group (RBS) 245.10p -1.68%
Tesco (TSCO) 236.40p -1.66%
easyJet (EZJ) 1,395.50p -1.66%
FTSE 250 - Risers
Hilton Food Group (HFG) 968.00p 2.98%
Premier Oil (PMO) 117.43p 2.56%
Sirius Minerals (SXX) 26.18p 2.29%
Convatec Group (CTEC) 235.98p 2.20%
Sanne Group (SNN) 605.86p 2.00%
TBC Bank Group (TBCG) 1,594.00p 1.79%
RPC Group (RPC) 818.40p 1.46%
Wetherspoon (J.D.) (JDW) 1,277.95p 1.42%
Intu Properties (INTU) 152.08p 1.39%
Workspace Group (WKP) 1,060.00p 1.34%
FTSE 250 - Fallers
Just Group (JUST) 71.30p -3.97%
Cairn Energy (CNE) 223.20p -3.88%
Sports Direct International (SPD) 346.50p -3.75%
Ferrexpo (FXPO) 140.05p -3.75%
Lancashire Holdings Limited (LRE) 572.50p -2.97%
Elementis (ELM) 245.60p -2.85%
Fidelity China Special Situations (FCSS) 202.50p -2.64%
Thomas Cook Group (TCG) 75.95p -2.63%
Fisher (James) & Sons (FSJ) 1,762.00p -2.44%
Britvic (BVIC) 791.00p -2.41%