London midday: Stocks weaker on UK jobs data, oil prices

London markets were in the red by lunchtime on Tuesday, as investors responded to ongoing concerns about the UK jobs market, while oil prices fell.

By midday, the FTSE 100 index had fallen 0.56% to 8,246.48 points, while the FTSE 250 was nearly flat, slipping 0.01% to 20,814.84 points.

“Oil prices fell as reports circled about Israel’s response to Iran, with indications they are likely to refrain from targeting oil or nuclear infrastructure,” said Finalto chief market analyst Neil Wilson.

“Flashes this morning indicate that Netanyahu and his defence minister Gallant have agreed what they will do and approval is now required from the security cabinet.

“If it’s non-escalatory - tit-for-tat rockets aimed into the desert - then it looks bearish for oil; if it’s a full-on strike aimed at national energy infrastructure then it would seem way more escalatory.”

Wilson noted that prices were already looking soft as OPEC cut its demand outlook again, while the China economic story underscored weakness in demand.

“It’s a mixed bag today for equity markets - the FTSE 100 declined early as oil heavyweights fell on the drop in crude prices and basic resources were lower as Chinese stocks were weaker; the DAX rose clear of the pack and the CAC was down on luxury and energy.

“Falling oil prices on a drop in geopolitical premia equals good for risk, but oil heavyweights and some ongoing China fears dragged on the indices.

“Generally there is a sense that China’s stimulus efforts are short of the mark too - nothing but full-scale QE will do now.”

UK earnings growth slows, German economic sentiment improves

In economic news, UK earnings growth slowed to its lowest rate in over two years, signalling further weakness in the jobs market as businesses cut back on payrolls.

Data released earlier showed average regular earnings growth at 4.9% in the three months to August, down from 5.1% in the previous quarter.

That marked the lowest growth rate since June 2022, according to the Office for National Statistics (ONS), and raised expectations of a potential rate cut from the Bank of England next month.

Job vacancies also declined by 34,000 to 841,000 in the quarter to September, while payroll numbers dropped by 35,000 between July and August.

Despite the negative trends, the unemployment rate unexpectedly fell to 4%, down from 4.1%, though the ONS cautioned that the figure should be interpreted with care due to a low response rate to its survey.

“The further fall in wage growth in August, together with some signs that the labour market continued to loosen gradually, adds further support to widespread expectations that the Bank of England will cut interest rates from 5.00% to 4.75% at the next policy meeting in November,” said Ashley Webb, UK economist at Capital Economics.

On the continent, economic sentiment in Germany showed signs of improvement.

The ZEW Indicator of Economic Sentiment, which tracks the outlook of around 350 financial experts, rose to 13.1 in October from 3.6 in September, exceeding expectations.

Although the sentiment index improved, the current situation index deteriorated further, dropping to -86.9, the lowest level since May 2020.

That suggested that while optimism about Germany's economic future is growing, immediate challenges remained.

Bellway rises, oil plays fall on crude prices

On London’s equity markets, Bellway was in the green despite the housebuilder reporting a sharp 62% drop in annual pre-tax profits to £183.7m, due to weaker demand amid higher mortgage rates.

Completions fell by a third, but the company's forward order book grew to 5,109 homes, up from 4,636 a year earlier, signalling potential improvement in future demand.

Wise also saw its stock rise, as the fintech platform reported a 17% increase in second-quarter income, driven by a 23% surge in active customer numbers.

The firm’s cross-border volume grew by 20%, boosting revenue to £337m for the quarter.

DiscoverIE Group shares gained after the company announced that first-half earnings were in line with expectations, while its strategy continued to support margin improvements and strong order levels.

Despite some customer destocking, DiscoverIE reported stabilising order levels and an increase in new design wins.

On the downside, oil majors were in the red as crude prices fell, with both BP and Shell down more than 3%.

QinetiQ Group shares dipped despite a trading update confirming the company was on track to meet full-year expectations, including high single-digit revenue growth and stable margins.

Investors seemed unmoved by its ongoing £100m share buyback programme.

Shares in Bytes Technology Group also fell after the company posted a 2.9% drop in revenue, despite a 13.7% rise in gross invoiced income.

Bytes benefited from strong contributions from public sector contracts, but the overall revenue decline weighed on investor sentiment.

Workspace Group saw its stock decline, despite completing 296 new lettings with a total rental value of £7.4m in the second quarter.

Occupancy rates dipped slightly as some larger tenants vacated, though the company reported positive pricing momentum with a 1.6% increase in rent per square foot.

Mitie Group shares were down, even though the facilities management firm reported strong top-line growth, helped by new contract wins and increased security market work.

Revenue climbed to £2.4bn for the six months to September, but the positive results failed to lift investor sentiment.

Outside the FTSE 350, Reach shares rose after the newspaper publisher said it was on track to meet market expectations, as a slight improvement in online revenues offset the decline in print.

De La Rue also moved higher after the currency and security printing firm announced the sale of its authentication division to Crane NXT for £300m, a move designed to strengthen its financial position.

Reporting by Josh White for Sharecast.com.