London open: Stocks climb ahead of UK jobs data

London stocks climbed on Wednesday before the release of the UK labour market report and the Bank of England’s testimony before the Treasury Select Committee.

The UK jobs report at 0930 BST is expected to show the employment change for the three months to July grew by 18,000 jobs, following a 63,000 drop in the previous quarter.

Average weekly earnings are forecast to rise 2.5% during the period compared to a previous 2.4% growth. The unemployment rate is projected to hold at 5.6% for the quarter. Jobless claims may have fallen 5,000 in August after a 4,900 decline a month earlier, analysts estimate.

The Bank of England is taking into account the health of the labour market in determining the timing of an interest rate hike. Figures on Tuesday revealing a drop in UK inflation to 0% in August from the previous month’s 0.1%, backed the central bank’s decision to stall on any change to policy last Thursday. Ian McCafferty was the only policymaker to vote in favour of an interest rate hike.

Lloyds Bank's analysts said firming in wage growth unpins the Monetary Policy Committee’s expectations of a gradual pick-up in inflation despite the slump in oil prices.

“Some of the more hawkish members prefer to focus on underlying costs and as such additional members could join McCafferty as of the November Report in shifting the balance towards a tightening of policy,” they said.

BoE governor Mark Carney will be speaking at the Treasury Select Committee hearing at 1415 BST on the August Inflation Report. The testimony may provide more clues on the BoE’s plans for interest rates. McCafferty and fellow MPC member Martin Weale, who argued that an interest rate hike needs to come “relatively soon”, will also speak.

US inflation

US inflation figures at 1330 BST are forecast to reveal 0.2% growth in August compared to a year ago, unchanged from the previous month’s gain. Core inflation, excluding food and energy prices, are anticipated to increase 0.1% in August, unchanged from the previous month.

The Federal Reserve, which is targeting 2% inflation, is monitoring CPI closely ahead of its decision on whether to raise interest rates on Thursday. The market is already divided on estimates for a rate increase, amid the recent volatility in global stocks, and an easing in CPI will likely see forecasts leaning towards no change in the Fed’s policy.

The Fed kicks off its two-day policy meeting on Wednesday before announcing its decision the next day.

“Markets are currently pricing in only a 25% chance of a rate hike at this stage but they have been wrong when it comes to the Fed on many occasions in the past, so I expect some of this caution that we’re seeing in the markets to persist,” said Craig Erlam, senior market analyst at Oanda.

Retailer JD Sports jumped after saying half-year sales had increased 10% with pre-tax profits almost doubling to £44.7m as the UK economy strengthened.

Glencore dropped as it raised £1.6bn by placing new shares with institutions and senior management at a small discount in order to pay off some of its debts.

Serco Group climbed as it agreed the sale of its offshore private sector Business Process Outsourcing operations to private equity funds managed by Blackstone for around £250m.

Galliford Try declined despite reporting a 20% rise in full-year profits and a 31% increase in revenue.

SABMiller rallied on revived rumours that the beer company could be taken over by rival Anheuser-Busch InBev NV, the maker of Budweiser.

Market Movers

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Burberry Group (BRBY) 1,444.00p +2.78%

SABMiller (SAB) 3,090.00p +2.50%

Aberdeen Asset Management (ADN) 327.00p +2.09%

TUI AG Reg Shs (DI) (TUI) 1,226.00p +2.08%

Reckitt Benckiser Group (RB.) 5,805.00p +2.04%

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Standard Chartered (STAN) 734.40p +1.84%

Carnival (CCL) 3,467.00p +1.52%

Glencore (GLEN) 130.00p +1.52%

BT Group (BT.A) 427.55p +1.42%

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Rolls-Royce Holdings (RR.) 716.50p -0.90%

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UBM (UBM) 507.50p +4.49%

Premier Oil (PMO) 83.45p +2.96%

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JD Sports Fashion (JD.) 912.00p +2.07%

FirstGroup (FGP) 103.80p +2.06%

Smith (DS) (SMDS) 406.40p +1.91%

CLS Holdings (CLI) 1,817.00p +1.85%

Henderson Group (HGG) 272.20p +1.83%

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Galliford Try (GFRD) 1,753.00p -2.67%

Card Factory (CARD) 360.80p -2.17%

Vectura Group (VEC) 173.30p -1.37%

Acacia Mining (ACA) 241.50p -1.23%

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Auto Trader Group (AUTO) 326.70p -0.70%

Fisher (James) & Sons (FSJ) 1,055.00p -0.57%

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