London open: Stocks mixed on weaker UK wage growth

London markets opened in mixed territory on Tuesday, as investors digested data showing continued weakness in the UK jobs market, after an upbeat session on Wall Street overnight.

As of 0822 BST, the FTSE 100 was down 0.12% at 8,282.39 points, while the FTSE 250 gained 0.26% to 20,871.08.

“The S&P 500 reached a new all-time high close, and the Dow Jones index surpassed 43,000 points for the first time, driven by a strong performance in semiconductor stocks, particularly a 2.4% jump in Nvidia, a prominent artificial intelligence company, as well as a positive start to the third-quarter earnings season,” said TickMill’s Patrick Munnelly.

“Asian equities broadly advanced, with Japan's Nikkei leading regional gains after prime minister Shigeru Ishiba reportedly stated his government aims to draft a supplementary budget for the current fiscal year exceeding the previous year's JPY 13.1trn to fund an economic support package.

“European equities are expected to start the trading session on a positive note on Tuesday, driven by investor confidence in corporate financial results.”

Munnelly added that attention was now turning to the financial results of Bank of America, Citigroup, Goldman Sachs, Johnson & Johnson, UnitedHealth, and Walgreens, following positive earnings reports from JPMorgan and Wells Fargo.

“The key focus for the European session will be the European Central Bank's survey on bank lending to the eurozone economy, which is expected to influence expectations ahead of Thursday's policy review.

“The ECB is widely anticipated to implement another 0.25% interest rate cut on Thursday, a move that policymakers were hesitant to signal and that traders had assigned less than a 25% probability to when the bank last met a month ago.”

Earnings growth slows to weakest level in over two years

In economic news, UK earnings growth slowed to its weakest level in over two years, highlighting a softening job market as businesses scaled back on payrolls.

Data from the Office for National Statistics (ONS) showed that average regular earnings increased by 4.9% in the three months to August, down from 5.1% in the previous quarter.

It marked the slowest wage growth since June 2022, raising market expectations for a potential rate cut from the Bank of England next month.

The report also showed a decline in job vacancies, with the number of open positions falling by 34,000 to 841,000 in the quarter to September.

Payrolls saw a drop of 35,000 between July and August, further evidence of a cooling labour market.

However, the unemployment rate unexpectedly decreased to 4% in the three months to August, from 4.1% previously, though the ONS cautioned that the figure may not be fully reliable due to a low survey response.

The ONS noted that pay growth continued to outpace inflation, though the effect of last year’s one-off public sector payments is still influencing the total pay figures.

“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.

Bellway rises on growing order book, QinetiQ in the red

On London’s equity markets, housebuilder Bellway saw its shares rise despite reporting a sharp drop in annual profits.

The company posted a 62% decline in pre-tax profit for the year ending July 31, to £183.7m, due to weaker demand amid higher mortgage rates.

Completions fell by a third to 7,654 homes.

However, Bellway's forward order book grew to 5,109 homes by the end of September, up from 4,636 a year earlier, with a value of £1.43bn, signalling improving conditions ahead.

Fintech platform Wise also saw gains after reporting a 17% increase in second-quarter income, driven by a surge in customer numbers.

The company reported underlying income of £337m for the quarter, with first-half growth reaching 19%.

Active customers rose by 23% to 8.9 million, as Wise benefited from strong recommendations.

Cross-border volume increased by 20% to £35.2bn, with significant growth in customer deposits and revenue from card and other services.

On the downside, QinetiQ Group shares slipped after a trading update in which the defence technology firm said it was on track to meet full-year expectations.

The company forecast high single-digit organic revenue growth and stable margins, with cash conversion around 80%.

It also confirmed progress in its £100m share buyback programme, having repurchased £62m in shares by the end of the quarter, but this did little to buoy investor sentiment.

Reporting by Josh White for Sharecast.com.