London midday: Stocks turn red as sterling gains; jobs data digested
London stocks had fallen into the red by midday on Tuesday as data showed the UK jobs market cooled in August, with sterling up on Brexit deal hopes.
The FTSE 100 was down 0.4% at 7,184.92, while the pound was 0.5% higher against the dollar and the euro at 1.2666 and 1.1493, respectively, having shot up earlier after the EU's chief Brexit negotiator, Michel Barnier, said a Brexit deal is possible.
Speaking ahead of a meeting of EU ministers in Luxembourg, Barnier said: "Our team are working hard. This work has been intense all over the weekend and yesterday.
"Because, even if an agreement will be difficult - more and more difficult, to be frank - it is still possible this week."
He added: "Reaching an agreement is still possible. Obviously any agreement must work for everyone - the whole of the UK and the whole of the EU. It is high time to turn good intentions into a legal text."
The currency briefly pared gains after data from the Office for National Statistics showed the UK unemployment rate unexpectedly ticked higher in August, but the main focus remained firmly on Brexit headlines.
In the three months to August, the number of people employed fell by 56,000 to 32.69 million, missing consensus expectations of a 26,000 increase and marking the worst decline since the spring of 2015. This pushed the unemployment rate up to 3.9% from 3.8% in July, which was the lowest rate since January 1975. Economists had been expecting the rate to remain unchanged.
Total earnings growth including bonuses rose by 3.8% in the three months to August on an annual basis, down from revised 4% growth in the previous three-month period and undershooting expectations for an unchanged reading.
Excluding bonuses, average earnings were up 3.8%, down from 3.9% in the previous three-month period but above the 3.7% expected.
Thomas Pugh, UK economist at Capital Economics, said: "This is further evidence that the underlying weakness in economic growth is restraining labour market activity. However, it could also be evidence that the uncertainty around Brexit is starting to impact firms hiring decisions. The survey evidence is consistent with a further softening in employment and wage growth going forward too.
"That all said, the labour market remains the strongest part of the economy. Annual employment growth may no longer be rising, but is still around its long-run average of 1.0% and the unemployment rate remains at a joint 45-year low. So the labour market still looks set to provide solid support to the economy over the next few years."
Elsewhere, Sino-US trade relations remained in focus after Bloomberg reported that China will struggle to buy $50bn of US farm goods a year unless it removes retaliatory tariffs on American products, a move it would only make if US President Trump reciprocates and rolls back levies implemented since the trade spat between the two began.
Bloomberg cited people familiar with the matter as saying that Beijing is willing to start purchasing more US agricultural products as part of the "phase one" deal agreed last week, but is unlikely to reach the $40bn to $50bn touted by Trump under current circumstances.
In UK equity markets, disappointing updates from the likes of molten metal flow engineering group Vesuvius, engineer Renishaw and pub group Marston's took their toll, while Bellway also slid after the housebuilder reported a jump in full-year profit amid strong demand but warned over margins.
Dollar-earners were also in the red as sterling gained, with Reckitt Benckiser, Diageo and AstraZeneca all weaker.
Woodford Patient Capital Trust was under pressure following news that the flagship investment fund of one-time stock market star Neil Woodford was set to be wound up. The fund's administrator, Link Fund Solutions, said cash from the £3.5bn Woodford Equity Income Fund, which has been suspended since June, would be returned to investors.
On the upside, banks advanced amid Brexit hopes, with RBS, Lloyds and Barclays all higher, while Premier Inn owner Whitbread was boosted by an upgrade to 'buy' at UBS and homeware retailer Dunelm was up after an upgrade by RBC Capital Markets.
Recruiter Hays rallied as its first-quarter results beat expectations, while gambling operator Rank Group was on the front foot as it said group like-for-like net gaming revenue rose 10% in Q1.
FTSE 100 (UKX) 7,184.92 -0.40%
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 221.30p 2.83%
Lloyds Banking Group (LLOY) 59.08p 2.23%
Ocado Group (OCDO) 1,331.00p 2.19%
Associated British Foods (ABF) 2,229.19p 1.93%
Aveva Group (AVV) 3,842.00p 1.86%
Auto Trader Group (AUTO) 531.80p 1.76%
Barclays (BARC) 160.36p 1.75%
Rightmove (RMV) 560.00p 1.56%
Whitbread (WTB) 4,232.00p 1.49%
Tesco (TSCO) 242.60p 1.46%
FTSE 100 - Fallers
Reckitt Benckiser Group (RB.) 5,972.00p -1.99%
Rolls-Royce Holdings (RR.) 737.80p -1.94%
Rio Tinto (RIO) 4,041.50p -1.79%
BHP Group (BHP) 1,649.00p -1.55%
Relx plc (REL) 1,789.00p -1.51%
HSBC Holdings (HSBA) 598.40p -1.47%
Coca-Cola HBC AG (CDI) (CCH) 2,488.00p -1.47%
AstraZeneca (AZN) 6,887.00p -1.32%
Prudential (PRU) 1,448.50p -1.29%
Fresnillo (FRES) 626.32p -1.27%
FTSE 250 - Risers
OneSavings Bank (OSB) 377.80p 5.12%
Hays (HAS) 150.80p 4.94%
Rank Group (RNK) 208.50p 4.88%
Grafton Group Units (GFTU) 836.00p 3.02%
Sanne Group (SNN) 560.00p 2.94%
Dunelm Group (DNLM) 807.00p 2.93%
Energean Oil & Gas (ENOG) 972.00p 2.86%
Ferrexpo (FXPO) 147.22p 2.84%
Stagecoach Group (SGC) 146.24p 2.62%
Polypipe Group (PLP) 436.60p 2.49%
FTSE 250 - Fallers
Vesuvius (VSVS) 361.20p -13.26%
Renishaw (RSW) 3,182.94p -10.59%
Marston's (MARS) 112.80p -7.54%
Provident Financial (PFG) 392.28p -6.60%
Bellway (BWY) 3,276.00p -6.19%
RHI Magnesita N.V. (DI) (RHIM) 3,672.00p -4.82%
Bodycote (BOY) 670.00p -3.87%
IP Group (IPO) 62.30p -3.41%
Jupiter European Opportunities Trust (JEO) 790.00p -3.07%
Morgan Advanced Materials (MGAM) 237.60p -3.02%