London midday: Stocks flat as pound pops higher after UK jobs data

Stocks in London were steady by midday, giving up the small gains from earlier as the pound popped higher after the latest round of UK jobs data showed the unemployment rate hit a 42-year low, but real wages shrank.

The FTSE 100 was flat at 7,523.21, after closing above 7,500 for the first time in the previous session. Meanwhile, the pound was up 0.4% versus the dollar at 1.2973.

Although the UK unemployment rate fell to its lowest since 1975 in the three months to March, weekly wage growth slowed to heap further pressure on consumers already battling with rising inflation. The unemployment rate unexpectedly fell to 4.6% from 4.7%, according to data from the Office for National Statistics, beating expectations for it to remain unchanged.

But despite the tightness of the labour market, employers are not increasing pay. Average weekly earnings excluding bonuses fell 0.2% in real terms compared with a year earlier, though was up 0.1% if bonuses are included.

In nominal terms, average weekly earnings rose 2.1% ex-bonuses, which was worse than the 2.2% increase the market expected and the smallest gain since July of last year, while the 2.4% gain including bonuses was in line with forecasts.

That was not all the bad news, as the more timely measure of the claimant count rate in April showed an increase to 2.3% from the 2.2% previously, with the claimant count up 19.4K, ahead of the consensus forecast of 7.5K.

Meanwhile, the latest survey from IHS Markit revealed that UK household finances remain under the greatest pressure since mid-2014 amid rising inflation, with cash available to spend falling to its lowest level in two-and-half years in May.

Ben Brettell, senior economist at Hargreaves Lansdown, said: "With inflation forecast to carry on rising - Bank of England policymakers predict inflation will peak at a little below 3% in the fourth quarter - household budgets look certain to be squeezed further in the coming months. The economy has surprised on the upside since last summer’s referendum, powered by a resilient consumer, but it looks like households are now starting to feel the pinch from the current bout of inflation with GDP growth slowing to 0.3% in the first quarter of this year."

Growing political turmoil in the US was also on investors' minds following reports that President Trump asked former Federal Bureau of Investigation director James Comey to end his investigation into former National Security Adviser Michael Flynn's ties with Russia. According to The New York Times, Trump told Comey he should consider trying to jail journalists for publishing classified information. If the report proves to be true, it could be seen as an attempt to obstruct justice, which is an impeachable offence.

On the UK corporate front, British Land fell despite reporting a much stronger net asset value at its year end than the market was expecting and, despite the ongoing uncertainty around the economy, saying it was confident of generating better returns in the year ahead.

Pub group Mitchells & Butlers was in the red as it posted a drop in profit for the 28 weeks to 8 April despite a rise in sales, pointing to increased costs and exchange rate movements.

Spectris was also weaker as it appointed a new chairman and highlighted mixed trading in the year to date, while shares in estate agency Foxtons fell after it reported a 25% drop in revenues for the quarter to the end of March.

Shares in estate agency Foxtons fell after it reported a 25% drop in revenues for the quarter to the end of March, while Dunelm and Halfords were hit by downgrades at HSBC and Hikma was dented by a downgrade at Jefferies.

On the upside, precious metals miner Fresnillo was the standout gainer as gold prices rallied on safe-haven demand amid worries about Trump.

Energy supplier SSE turned higher after posting results that were better than it expected and lifting its total dividend.

Lloyds Banking Group was on the front foot after the UK government sold down its remaining shares in the bank, returning it to full private ownership.

Countryside Properties rallied after it said full-year profit was likely to be ahead of market expectations and reported a 31% jump in half-year completions and an increase in profit, while Tullow Oil gushed higher after making an "important" discovery in Northern Kenya.

Cyber security company Sophos - whose shares have benefited from the recent WannaCry security hack - racked up strong gains after its full-year results beat expectations with reported billings up 18.2% and a big hike in the dividend.

Rio Tinto was lifted by an upgrade to 'top pick' at RBC Capital Markets, while Virgin Money got a boost from a Credit Suisse upgrade.

Market Movers

FTSE 100 (UKX) 7,523.21 0.02%
FTSE 250 (MCX) 19,847.94 -0.14%
techMARK (TASX) 3,614.95 0.01%

FTSE 100 - Risers

Fresnillo (FRES) 1,617.00p 3.45%
Lloyds Banking Group (LLOY) 72.26p 3.01%
Kingfisher (KGF) 367.00p 2.46%
Pearson (PSON) 699.00p 1.67%
Hargreaves Lansdown (HL.) 1,345.00p 1.59%
DCC (DCC) 7,385.00p 1.58%
Reckitt Benckiser Group (RB.) 7,623.00p 1.42%
Tesco (TSCO) 180.55p 1.18%
Randgold Resources Ltd. (RRS) 7,390.00p 0.96%
Paddy Power Betfair (PPB) 8,500.00p 0.95%

FTSE 100 - Fallers

British Land Company (BLND) 654.50p -2.89%
Hikma Pharmaceuticals (HIK) 1,728.00p -2.15%
Ashtead Group (AHT) 1,597.00p -1.54%
Intu Properties (INTU) 269.60p -1.43%
CRH (CRH) 2,838.00p -1.25%
Legal & General Group (LGEN) 254.00p -1.24%
Prudential (PRU) 1,750.00p -1.07%
Next (NXT) 4,277.00p -1.04%
Johnson Matthey (JMAT) 3,114.00p -0.92%
Hammerson (HMSO) 584.00p -0.85%

FTSE 250 - Risers

Sophos Group (SOPH) 414.00p 11.95%
SIG (SHI) 133.70p 5.28%
Tullow Oil (TLW) 208.50p 3.63%
Ferrexpo (FXPO) 172.50p 3.29%
Aggreko (AGK) 858.00p 1.96%
Berendsen (BRSN) 859.50p 1.78%
CLS Holdings (CLI) 201.50p 1.77%
Inchcape (INCH) 849.50p 1.74%
Hochschild Mining (HOC) 275.70p 1.73%
Hunting (HTG) 572.00p 1.69%

FTSE 250 - Fallers

Mitchells & Butlers (MAB) 256.70p -6.65%
Auto Trader Group (AUTO) 399.10p -4.82%
Dunelm Group (DNLM) 592.00p -3.90%
Wetherspoon (J.D.) (JDW) 1,029.00p -2.74%
Ted Baker (TED) 2,472.00p -1.83%
CYBG (CYBG) 275.50p -1.82%
UBM (UBM) 704.00p -1.81%
NMC Health (NMC) 2,126.00p -1.53%
Allied Minds (ALM) 143.20p -1.51%
Kaz Minerals (KAZ) 486.10p -1.48%