London close: FTSE ends lower ahead of Fed's meeting minutes

The FTSE 100 ended lower on Wednesday as investors weighed mixed UK jobs data and awaited the Federal Reserve’s policy meeting minutes.

The Office for National Statistics revealed UK employment rose 44,000 to 31.58 million in the three months to March compared to the previous quarter, beating expectations for no additions.

Average weekly earnings rose an annualised 2.0% during the period, compared to analysts’ estimates for a 1.7% gain and the previous quarter’s 1.9% year-on-year increase.

The unemployment rate held at 5.1%, as expected but the number of unemployed fell 2,000 in the three months to March.

"This is a softish labour market report overall, but not as bad as feared," said Howard Archer, chief UK and European economist at IHS Global Insight.

"Overall, the labour market data will likely reinforce belief that an interest rate hike by the Bank of England is likely to remain off the table for some considerable time to come – even if there is a vote to remain in the EU in June’s referendum."

Meanwhile, the pound rose 1.05% against the dollar as a poll showed the campaign to keep the UK within the European Union has taken an 18 percentage-point lead over the drive for it to leave. Ipsos Mori’s Political Monitor for May said 55% of 1002 people surveyed wanted UK to remain in the EU, against 37% wanting it to leave. Eight percent were either undecided or would not vote.

“The result of June’s EU referendum is arguably the biggest event of 2016 for UK traders and as we look increasingly likely to see ‘remain’ win out, it is likely we will see a rush into sterling to precede the event itself,” said IG market analyst Joshua Mahony.

In the eurozone, data from Eurostat on Wednesday confirmed the eurozone fell back into deflation in April.

Consumer prices fell 0.2% compared to a year ago, in line with the preliminary estimate and consensus, and down from 0.0% in March.

“Today’s results show that inflation in the eurozone is holding steady, but a contracting rather than expanding economy is surely not what Mario Draghi had in mind at this stage of his ECB presidency,” said Dennis de Jong, managing director at UFX.com.

Attention now turns to minutes from the Fed’s 26-27 April meeting at 1900 BST. Economists will be searching for clues on whether the Fed will raise interest rates in June.

Societe Generale said Fed officials appear to be leaning more heavily against the ultra-dovish rate path implied by the market.

“Last week, Eric Rosengren, a current voter, said that market remains too pessimistic about the US economy,” the bank said.

“Yesterday, Fed Presidents Williams and Lockhart remarked that two to three hikes for this year are appropriate and Kaplan said that rate hikes are appropriate in the not-too-distant future.”

SocGen argued that a rate hike in June was unlikely but said the Fed may be starting to make preparations for an eventual hike, perhaps by returning to a balance risk assessment in the June FOMC statement. The bank sees only one hike this year, in December.

In commodities, prices wavered as a report from the Energy Information Administration showed US crude oil inventories rose 1.3m barrels to 541.3m barrels in the week ended 13 May. The EIA noted that this was a historical high for this time of the year.

Brent crude climbed 0.84% to $49.71 per barrel and West Texas Intermediate increased 1.1% to $48.85 per barrel at 1648 BST.

On the corporate front, banks rallied on speculation of a rate hike by the Federal Reserve with Royal Bank of Scotland, Barclays and Lloyds Banking Group in the black.

"Banks are struggling in this low rate environment and their interest margins are rock-bottom, so the sooner the US gets on and starts raising rates, the better it is for the banks' core business," Jasper Lawler, market analyst at CMC Markets, said.

ARM Holdings advanced as the chip maker said it has acquired the entire share capital of imaging and embedded computer vision intellectual property company Apical.

Going the other way, Burberry slumped after saying full year profits fell 10%, at the bottom of analysts' range of estimates, due to pressures in China.

Chilean copper miner Antofagasta declined as it confirmed that two major development projects have been slowed to preserve cash.

Fellow miners Anglo American, Glencore and Rio Tinto were also under pressure as metal prices fell.

Market Movers

FTSE 100 (UKX) 6,152.08 -0.25%
FTSE 250 (MCX) 16,869.34 0.14%
techMARK (TASX) 3,064.75 -0.19%

FTSE 100 - Risers

Royal Bank of Scotland Group (RBS) 223.40p 4.15%
Lloyds Banking Group (LLOY) 69.52p 3.33%
Standard Life (SL.) 330.70p 3.31%
Ashtead Group (AHT) 958.00p 3.29%
Barclays (BARC) 169.45p 3.17%
easyJet (EZJ) 1,482.00p 3.13%
Marks & Spencer Group (MKS) 440.70p 2.56%
Aviva (AV.) 431.00p 2.35%
Whitbread (WTB) 4,089.00p 1.97%
ARM Holdings (ARM) 945.00p 1.83%

FTSE 100 - Fallers

Anglo American (AAL) 603.80p -3.96%
Antofagasta (ANTO) 419.90p -3.20%
Glencore (GLEN) 132.35p -3.04%
BHP Billiton (BLT) 841.40p -2.32%
Rio Tinto (RIO) 1,988.00p -2.26%
Burberry Group (BRBY) 1,118.00p -2.19%
Mondi (MNDI) 1,316.00p -2.08%
Inmarsat (ISAT) 763.00p -2.05%
Intu Properties (INTU) 288.60p -2.00%
Randgold Resources Ltd. (RRS) 6,235.00p -1.81%

FTSE 250 - Risers

Allied Minds (ALM) 344.10p 9.52%
Ophir Energy (OPHR) 72.40p 6.71%
Booker Group (BOK) 174.90p 6.06%
Shawbrook Group (SHAW) 280.40p 6.05%
Pendragon (PDG) 36.34p 4.79%
Jardine Lloyd Thompson Group (JLT) 895.00p 3.23%
Lookers (LOOK) 143.80p 3.08%
SSP Group (SSPG) 309.00p 3.00%
Just Eat (JE.) 417.90p 2.88%
Sophos Group (SOPH) 229.30p 2.87%

FTSE 250 - Fallers

Marshalls (MSLH) 324.00p -6.60%
Greencore Group (GNC) 367.30p -4.05%
Centamin (DI) (CEY) 114.10p -3.55%
Meggitt (MGGT) 389.40p -3.54%
Kaz Minerals (KAZ) 153.90p -3.45%
Acacia Mining (ACA) 337.70p -3.18%
Entertainment One Limited (ETO) 168.50p -2.94%
St. Modwen Properties (SMP) 306.80p -2.23%
Rathbone Brothers (RAT) 2,002.00p -2.20%
Murray International Trust (MYI) 947.50p -1.71%