London midday: Stocks rally as UK unemployment rate falls unexpectedly

London stocks rallied after official data showed the UK unemployment rate fell unexpectedly and the number of people in work rose more than forecast in the three months to October.

The unemployment rate fell to 5.2% from 5.3% the previous quarter, according to the Office for National Statistics.

Employment rose by 207,000 to 31.3m during the quarter, beating analysts' estimates of 150,000 and marking a pick-up on the 177,000 recorded in the prior three months.

However, average weekly earnings increased 2.4% compared to the same quarter a year ago, missing expectations for a 2.5% rise and following the previous quarter's 3% gain.

"The latest UK figures show a slowdown in wage growth, adding to evidence that there is no need for the Bank of England's Monetary Policy Committee to follow the Federal Reserve in raising interest rates just yet," said Scott Bowman, UK economist at Capital Economics.

Jobless claims rose 3,900 in November, worse than the 800 claims predicted and October's 200. The claimant count rate last month rose 2.3%, as anticipated and the same as October's growth.

With employment data out of the way, investors are now turning their focus to the Federal Reserve’s policy decision after the UK markets close.

The Fed is widely expected to raise interest rates for the first time in nearly a decade by 25 basis points.

“Whatever the decision, I expect to see plenty of volatility in the markets, especially as investors attempt to correctly interpret Chair Janet Yellen’s comments in the press conference which follows” said Craig Erlam, senior market analyst at Oanda.

“Of course, the most volatility would likely come if the Fed gets cold feet like its European counterparts and pulls the plug altogether.”

In the Eurozone, the final estimate of inflation was unexpectedly revised to a 0.2% year-on-year increase in November from an earlier estimate of 0.1%.

Eurozone service activity growth eased in December, according to Markit’s preliminary estimate. The purchasing managers’ index fell to 53.9 this month from 54.2 in November, missing forecasts of 54. A reading above 50 signals expansion while a level below that indicates a contraction.

Eurozone manufacturing PMI, however, rose to 53.1 in December from 52.8 in November. Analysts had expected no change in the reading.

In company news, Astrazeneca gained after it received a $380m payment from Irish competitor Perrigo as the FTSE 100 company completed the disposal of right for a Crohn's disease medicine.

SuperGroup surged after reporting a 54.4% jump in pre-tax profits in the first half to £19.3m.

Pearson was a high riser after Exane BNP Paribas upgraded the stock to ‘outperform’ from ‘neutral’.

Rolls-Royce advanced after splitting out its divisions and reshuffling its senior management team, in what it said is the first step in a “wide-ranging” restructuring programme.

Market Movers

FTSE 100 (UKX) 6,067.44 0.83%
FTSE 250 (MCX) 17,059.78 0.35%
techMARK (TASX) 3,151.67 0.61%

FTSE 100 - Risers

Pearson (PSON) 736.50p 4.17%
Shire Plc (SHP) 4,334.00p 3.63%
Dixons Carphone (DC.) 491.40p 3.08%
BHP Billiton (BLT) 707.70p 3.03%
HSBC Holdings (HSBA) 524.20p 2.46%
Antofagasta (ANTO) 423.00p 2.45%
Rolls-Royce Holdings (RR.) 553.00p 2.41%
Anglo American (AAL) 276.85p 2.12%
Vodafone Group (VOD) 213.80p 2.05%
Ashtead Group (AHT) 1,121.00p 1.91%

FTSE 100 - Fallers

Tesco (TSCO) 146.85p -1.64%
Sports Direct International (SPD) 570.00p -1.64%
ARM Holdings (ARM) 1,039.00p -1.24%
Mondi (MNDI) 1,312.00p -1.06%
Sainsbury (J) (SBRY) 247.10p -0.88%
Next (NXT) 7,445.00p -0.80%
Persimmon (PSN) 1,957.00p -0.66%
Marks & Spencer Group (MKS) 460.20p -0.52%
SSE (SSE) 1,444.00p -0.41%
Taylor Wimpey (TW.) 197.90p -0.40%

FTSE 250 - Risers

Supergroup (SGP) 1,661.00p 9.56%
Acacia Mining (ACA) 167.80p 6.27%
AA (AA.) 300.30p 5.15%
Bwin.party Digital Entertainment (BPTY) 122.70p 5.14%
Aldermore Group (ALD) 216.00p 5.11%
Entertainment One Limited (ETO) 172.20p 4.24%
Drax Group (DRX) 218.60p 3.70%
OneSavings Bank (OSB) 351.10p 3.26%
Ophir Energy (OPHR) 84.30p 2.49%
Evraz (EVR) 63.80p 2.49%

FTSE 250 - Fallers

Brown (N.) Group (BWNG) 305.50p -4.86%
Kaz Minerals (KAZ) 88.85p -4.20%
Indivior (INDV) 184.20p -3.56%
Debenhams (DEB) 73.95p -2.63%
Allied Minds (ALM) 405.00p -2.27%
Tullett Prebon (TLPR) 350.70p -1.98%
Dignity (DTY) 2,399.00p -1.92%
Millennium & Copthorne Hotels (MLC) 470.20p -1.88%
Polymetal International (POLY) 535.50p -1.83%
Circassia Pharmaceuticals (CIR) 295.00p -1.67%