London midday: Stocks turn up but gains muted ahead of US inflation data

London stocks had popped higher by midday on Tuesday but gains were muted as investors mulled the latest UK jobs data and looked ahead to the release of US inflation figures.

The FTSE 100 was up 0.3% at 7,497.65.

Data released earlier by the Office for National Statistics showed that real wages continued to fall in July, while the jobless rate dipped to its lowest level since 1974 as more people dropped out of the workforce.

The unemployment rate fell to 3.6% in the three months to July from 3.8% in the previous quarter. Economists were expecting the rate to be unchanged.

The number of people in employment grew by 40,000 in the three-month period. This was the smallest increase since February and was well below consensus expectations for a 128,000 jump. The UK workforce remains 250,000 smaller than it was before the pandemic hit.

Meanwhile, total pay including bonuses rose 5.5% on the year, up from 5.2% and versus expectations of 5.4% growth. Meanwhile, regular pay grew 5.2%, up from 4.7% and compared to consensus expectations of 5.1% growth.

In real terms, however, total pay fell 2.6% and regular pay was down 2.8%.

Oanda market analyst Craig Erlam said: "It's not often that you see the unemployment rate fall to the lowest in almost 50 years and aren't overjoyed, but that will certainly be the feeling at the Bank of England right now.

"Less labour market slack and faster wage growth increase the odds of a 75-basis point hike from the Monetary Policy Committee next week, especially against the backdrop of higher core inflation expectations over the medium term as a result of the new cap on energy bills."

Still to come on the macro front, the US consumer price index for August is due at 1330 BST.

Neil Wilson, chief market analyst at Markets.com, said: "Markets could be pinning the hope on inflation pressures beginning to ease with today’s US inflation data. After rising 1.3% in June, CPI was unchanged in July at an annual rate of 8.5%.

"With US energy prices cooling, investors will be looking for further signs of a slowdown in inflation and what this could mean for the Fed’s hiking cycle. Specifically, how jumbo is next week’s rate hike? The risk for equities is that even if inflation does moderate over the course of the year, it won’t deter the Fed from further tightening."

In equity markets, software company Aveva rallied following a report it is closing in on a takeover agreement with French industrial group Schneider Electric worth about £9bn. According to Sky News, the boards of the two companies and their advisers are discussing a price of more than £30-a-share for Schneider to acquire the roughly-40% of Aveva it does not already own.

Fund management services provider JTC shot higher after well-received first-half results, while media company Future also rose after it said full-year adjusted operating profits were set to be at the top end of market expectations.

Review website Trustpilot surged as it reported a narrowing of its first-half losses as sales jumped 22%.

On the downside, Ocado tumbled after the online supermarket warned of an expected fall in annual sales as customers start to tighten their belts amid the cost-of-living crisis.

Market Movers

FTSE 100 (UKX) 7,497.65 0.33%
FTSE 250 (MCX) 19,572.00 0.30%
techMARK (TASX) 4,388.77 0.50%

FTSE 100 - Risers

Fresnillo (FRES) 778.80p 3.51%
Aveva Group (AVV) 3,044.00p 2.87%
Whitbread (WTB) 2,743.00p 2.62%
Flutter Entertainment (CDI) (FLTR) 10,975.00p 2.47%
Harbour Energy (HBR) 490.50p 2.17%
Burberry Group (BRBY) 1,807.50p 1.95%
Entain (ENT) 1,281.00p 1.87%
Haleon (HLN) 267.80p 1.44%
Rio Tinto (RIO) 5,005.00p 1.22%
Compass Group (CPG) 1,949.00p 1.19%

FTSE 100 - Fallers

Ocado Group (OCDO) 718.40p -9.66%
Tesco (TSCO) 246.90p -2.45%
Frasers Group (FRAS) 835.50p -2.39%
Melrose Industries (MRO) 123.65p -2.37%
Sainsbury (J) (SBRY) 210.10p -1.55%
Next (NXT) 5,992.00p -1.19%
British Land Company (BLND) 418.50p -1.04%
Unite Group (UTG) 1,059.00p -1.03%
Hikma Pharmaceuticals (HIK) 1,303.50p -0.95%
Auto Trader Group (AUTO) 662.80p -0.93%

FTSE 250 - Risers

JTC (JTC) 844.00p 9.75%
Future (FUTR) 1,855.00p 7.72%
Polymetal International (POLY) 233.00p 4.95%
Abrdn Private Equity Opportunities Trust (APEO) 424.00p 3.41%
National Express Group (NEX) 195.80p 2.89%
HGCapital Trust (HGT) 410.00p 2.76%
easyJet (EZJ) 374.00p 2.47%
Crest Nicholson Holdings (CRST) 234.20p 2.18%
Serco Group (SRP) 171.60p 2.14%
Dr. Martens (DOCS) 260.40p 2.12%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 159.40p -7.73%
Ferrexpo (FXPO) 166.80p -3.97%
Bridgepoint Group (Reg S) (BPT) 274.60p -2.42%
Countryside Partnerships (CSP) 254.80p -2.38%
Hammerson (HMSO) 21.73p -2.21%
Dunelm Group (DNLM) 747.00p -2.10%
Investec (INVP) 406.50p -1.91%
Vistry Group (VTY) 785.50p -1.81%
Tyman (TYMN) 221.00p -1.56%
Syncona Limited NPV (SYNC) 201.00p -1.47%