London close: Stocks end lower ahead of Fed rate announcement

London stocks ended lower on Wednesday following a mixed UK jobs report and ahead of the Federal Reserve’s policy announcement.

The FTSE 100 fell 0.28% to 6,949.19 points at the closing bell.

While the UK unemployment rate remained flat at 4.8% in the three months to October and wages spiked, more timely official figures showed a rise in the claimant count which led some economists to say that cracks were beginning to appear in the labour market.

The Office for National Statistics revealed the November UK claimant count increased by 2,400, following the 13,000 jump in October to take the claimant count level of unemployment up to 809,000, which is the highest level since February 2015. Economist had expected a 6,500 increase.

The number of people in employment dropped 6,000 in the three months to October, their second fall in eight months and well short of the consensus estimate of a 50,000 rise.

Average weekly earnings, including bonuses, rose by an annual 2.5% in the three months to October, compared with 2.4% in the three months to September and analysts' forecasts for a 2.3% gain.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “This is clearly a softer report overall. Cracks are beginning to appear in the labour market.”

Looking ahead, Archer believes the economy and labour market will be increasingly pressurised by mounting uncertainties over the coming months, particularly once Article 50 is triggered to begin the formal Brexit process. The government plans to invoke Article 50 by March 2017.

“Consequently, we see the unemployment rate starting to trend up before too long and suspect that it could reach 5.5% by the end of 2017,” Archer said. “We see it rising further to 5.9% by the end of 2018.”

In the US, all eyes are on the Fed as it prepares to announce its policy decision at 1900 GMT. In light of an improving economy, most economists expect an increase in interest rates to a range of 0.50% and 0.75% from the current 0.25% to 0.50%.

Craig Erlam, senior market analyst at Oanda, said: “It would seem the promise of government spending in the coming years has made investors less anxious about the prospect of interest rate increases, although as always it’s a matter of pace more so than the actual act of tightening which is what makes the projections, dot plot and press conference so important today.

“Given the already tightening labour market and improving wage and inflation environment, the prospect of fiscal stimulus and the rise in oil prices, it will be interesting to see just how hawkish the Fed’s projections will be.

“I think Yellen will be keen to avoid spooking the market, especially at this time of year, but the forecasts may come as a surprise to investors, with markets currently pricing in only one rate hike by November.”

In other US news, the Commerce Department said retail sales climbed just 0.1% last month, falling short of forecasts for a 0.3% increase. October’s figures were also revised down to 0.6% growth from a previously reported 0.8% rise.

US industrial production fell 0.4% in November, compared to an upwardly revised 0.1% increase in October and estimates for a 0.3% drop, according to Federal Reserve data. Manufacturing output dipped 0.1% last month, better than the 0.2% decrease expected and following a 0.3% gain the previous month.

US business inventories fell 0.2% in October after being unchanged in September, the Commerce Department revealed. Economists had expected a 0.1% decline.

Meanwhile, oil prices dropped even as the Energy Information Administration reported crude inventories fell by 2.6m barrels last week, compared to analysts’ estimates for a decrease of 1.6m barrels.

In contrast, during the previous session the American Petroleum Institute reported an increase in crude inventories by 4.7m barrels in the week to 9 December, compared to expectations for a decline of 1.6m barrels.

Brent crude was down 1.1% to $55.11 per barrel and West Texas Intermediate fell 1.5% to $52.16 per barrel at 1634 GMT.

In corporate news, Dixons Carphone slumped despite reporting a bigger-than-expected jump in first-half profits and upping its dividend as it said it was preparing for “more uncertain times ahead" as the UK exits from the EU.

JD Sports shares headed south after a Channel 4 undercover investigation claimed to have found conditions in its Rochdale warehouse were "worse than a prison".

Software product group Micro Focus International was in the black after reporting a rise in revenue and pre-tax profit for the first half.

Shares in Hastings Group spiked after the insurer confirmed that Rand Merchant Investment was acquiring a 29.9% stake.

Pub company Mitchells & Butlers frothed up on anticipation of merger and acquisition activity in the sector after rival Punch Taverns confirmed it had received two takeover offers, one from Patron Capital Advisers on behalf of Dutch brewer Heineken and the other from Emerald Investment Partners.

Barclays shares were under pressure as Exane downgraded the stock to ‘neutral’ from ‘outperform’.

Wizz Air descended after the budget airline said chief financial officer Sonia Jerez Burdeus has resigned to relocate back to Spain.

Market Movers

FTSE 100 (UKX) 6,949.19 -0.28%
FTSE 250 (MCX) 17,682.38 -0.19%
techMARK (TASX) 3,297.41 0.14%

FTSE 100 - Risers

Polymetal International (POLY) 805.50p 6.41%
Capita (CPI) 476.90p 5.42%
Micro Focus International (MCRO) 2,219.00p 4.18%
Fresnillo (FRES) 1,180.00p 3.51%
Whitbread (WTB) 3,569.00p 3.15%
Randgold Resources Ltd. (RRS) 5,945.00p 2.85%
Standard Chartered (STAN) 682.80p 2.18%
St James's Place (STJ) 1,010.00p 2.12%
Anglo American (AAL) 1,202.50p 2.04%
Provident Financial (PFG) 2,714.00p 1.61%

FTSE 100 - Fallers

Dixons Carphone (DC.) 342.60p -6.57%
Barclays (BARC) 221.75p -3.63%
International Consolidated Airlines Group SA (CDI) (IAG) 433.90p -2.82%
Antofagasta (ANTO) 721.00p -2.37%
Mondi (MNDI) 1,550.00p -2.15%
Glencore (GLEN) 279.55p -1.69%
3i Group (III) 679.00p -1.59%
Hammerson (HMSO) 550.00p -1.52%
BAE Systems (BA.) 589.00p -1.42%
Paddy Power Betfair (PPB) 8,355.00p -1.42%

FTSE 250 - Risers

IG Group Holdings (IGG) 489.70p 8.65%
Paysafe Group (PAYS) 330.00p 7.95%
Hastings Group Holdings (HSTG) 236.50p 6.82%
CMC Markets (CMCX) 99.90p 5.16%
International Personal Finance (IPF) 175.00p 5.11%
Renishaw (RSW) 2,552.00p 3.87%
Acacia Mining (ACA) 397.40p 3.41%
Mitchells & Butlers (MAB) 240.90p 2.99%
BBA Aviation (BBA) 271.20p 2.77%
Centamin (DI) (CEY) 130.50p 2.51%

FTSE 250 - Fallers

JD Sports Fashion (JD.) 313.60p -7.08%
Thomas Cook Group (TCG) 84.70p -4.62%
Sports Direct International (SPD) 280.40p -3.81%
Greencore Group (GNC) 236.50p -3.47%
BGEO Group (BGEO) 3,135.00p -3.30%
NMC Health (NMC) 1,404.00p -3.04%
Balfour Beatty (BBY) 271.80p -2.93%
Indivior (INDV) 279.30p -2.78%
Smith (DS) (SMDS) 407.10p -2.63%
UDG Healthcare Public Limited Company (UDG) 667.00p -2.20%