London close: FTSE rises after UK jobs data as Fed rate decision looms

The FTSE 100 ended higher on Wednesday after a mixed UK jobs report and before the Federal Reserve’s interest rate decision.

The UK added 55,000 jobs in the three months to April, missing expectations for 60,000 jobs but more than the previous period’s 44,000, the Office for National Statistics revealed. The jobless rate unexpectedly fell to 5.0% from 5.1%.

Average weekly earnings also beat forecasts, rising an unchanged 2.0% year-on-year during the quarter against expectations for a 1.7% increase.

Jobless claims in May fell by 400, compared to analysts’ estimates for no change and the previous month’s 6,400 rise. The claimant count last month climbed 2.2% in May, the same rate of growth as April but below projections for a 2.1% gain.

Howard Archer, chief UK and European economist at IHS, said the gap between earnings growth and consumer price inflation is down from peak levels seen around August and September, thereby diluted consumers’ purchasing power.

“Earnings growth at 2.0% in the three months to April is still below the level (at least 3.0%) that the Bank of England believes is consistently needed to get consumer price inflation up towards its 2.0% target level,” he said.

Elsewhere, China’s banks extended 985.5bn yuan in new yuan loans in May, exceeding analysts' expectations of 750bn yuan and well above the previous month's levels of 555.6bn yuan.

The move came as the central bank has pledged to keep policy accommodative to support the slowing economy.

In the eurozone, the trade surplus widened in April, according to the latest figures from Eurostat. Exports were up 4.9% from March and imports increased 2.6%, meaning the trade surplus widened to a seasonally-adjusted €28bn from €23.7bn in March, which was above economists’ expectations of €21.5bn.

Meanwhile, Brexit news remained under watch as chancellor George Osborne warned that a vote by Britain to leave the European Union in the 23 June referendum would prompt an emergency budget of spending cuts and tax increases to cope with a recession.

However shadow chancellor John McDonnell said the Labour Party would never support Osborne's proposed post-Brexit emergency budget.

Capital Economics said: “Today’s warnings from the ‘Remain’ camp that the government would ramp up austerity immediately in a post-Brexit emergency Budget do not look very plausible. It is more likely that the Government would support the economy by loosening fiscal policy.”

Separately, the Economist Intelligence Unit also forecast that the pound would fall 14-15% against the dollar if Britain exits the EU.

Still to come, the Federal Reserve is expected to sit tight on interest rates in its policy decision at 1900 BST amid uncertainty surrounding Britain’s EU referendum on 23 June and following weak employment data for May.

While the Fed is not expected to raise rates on Wednesday, chair Janet Yellen’s post-meeting press conference may give clues on the timing of the next hike.

“With markets pricing in a zero percent chance of a rate hike at the June meeting, attention will instead turn to the Fed’s characterisation of the domestic economy,” said Societe Generale.

“Despite the weak May employment report, we expect the Fed will be keen on striking a balanced stance, offsetting a modest downgrading of the labour market with a somewhat more upbeat assessment of household spending.”

Ahead of the policy announcement, data from the Fed showed industrial production contracted 0.4% in May after a revised 0.6% increase in April. The decline was in line with economists’ expectations.

Manufacturing fell 0.4% in May driven by a sharp 4.2% decline in output of autos and auto parts. Analysts had expected a 0.1% fall last month compared to a 0.2% gain.

The Labor Department said US producer prices rose 0.4% in May against expectations for a 0.3% gain as an increase in fuel costs pushed wholesale inflation higher.

Oil prices have rebounded in the past few months.

However, oil prices were sitting lower on Thursday on worries about the global supply glut with Brent crude down 0.87% to $49.40 per barrel and West Texas Intermediate down 0.24% to $48.37 per barrel at 1649 BST.

On the company front, mining stocks rallied as metal prices rose with Glencore, Antofagasta and Anglo American leading the way.

Housebuilders slumped on Brexit fears and data from the Council of Mortgage Lenders showing a drop in lending in April. Berkeley Group and Taylor Wimpey were in the red.

Aveva Group declined after it walked away from a second round of talks with French suitor Schneider Electric and has applied for its share to resume trading after their suspension.

Luxury goods maker Jimmy Choo gained after saying it had made a good start to the year and trading was in line with expectations despite headwinds facing the majority of the sector in 2016.

Market Movers

FTSE 100 (UKX) 5,980.87 0.97%
FTSE 250 (MCX) 16,325.70 0.58%
techMARK (TASX) 2,979.73 0.40%

FTSE 100 - Risers

Glencore (GLEN) 137.05p 6.94%
Antofagasta (ANTO) 419.70p 6.39%
Anglo American (AAL) 631.00p 5.25%
BHP Billiton (BLT) 822.00p 4.09%
Rio Tinto (RIO) 1,969.50p 3.90%
Pearson (PSON) 815.00p 3.43%
Standard Chartered (STAN) 505.90p 2.76%
Tesco (TSCO) 151.20p 2.61%
Mediclinic International (MDC) 887.00p 2.42%
Burberry Group (BRBY) 1,066.00p 2.40%

FTSE 100 - Fallers

Whitbread (WTB) 3,847.00p -1.56%
Paddy Power Betfair (PPB) 8,860.00p -1.28%
Taylor Wimpey (TW.) 171.10p -1.16%
Berkeley Group Holdings (The) (BKG) 2,956.00p -1.14%
Inmarsat (ISAT) 689.50p -0.79%
Coca-Cola HBC AG (CDI) (CCH) 1,373.00p -0.72%
Royal Dutch Shell 'B' (RDSB) 1,727.00p -0.66%
Intertek Group (ITRK) 3,100.00p -0.42%
Royal Dutch Shell 'A' (RDSA) 1,715.00p -0.41%
3i Group (III) 522.50p -0.29%

FTSE 250 - Risers

Jimmy Choo (CHOO) 109.20p 13.81%
Evraz (EVR) 126.00p 6.78%
Indivior (INDV) 227.50p 6.36%
Go-Ahead Group (GOG) 2,095.00p 5.01%
OneSavings Bank (OSB) 301.30p 4.91%
Vedanta Resources (VED) 391.30p 4.91%
Aggreko (AGK) 1,174.00p 4.08%
Ted Baker (TED) 2,606.00p 3.29%
William Hill (WMH) 293.50p 3.16%
Tullow Oil (TLW) 243.50p 3.13%

FTSE 250 - Fallers

Aveva Group (AVV) 1,630.00p -12.11%
FirstGroup (FGP) 102.40p -6.31%
Clarkson (CKN) 2,125.00p -5.13%
AO World (AO.) 146.20p -3.43%
Rathbone Brothers (RAT) 1,731.00p -2.42%
Softcat (SCT) 344.40p -2.41%
Barr (A.G.) (BAG) 502.00p -2.14%
Aldermore Group (ALD) 187.60p -2.09%
Dechra Pharmaceuticals (DPH) 1,026.00p -2.01%
DFS Furniture (DFS) 288.10p -1.67%