London midday: Stocks fall further as pound gains on employment data

The FTSE 100 was off 0.7% at 6,921.88 as sterling rose 0.1% against the dollar and the euro to 1.2905 and 1.1360, respectively, after data from the Office for National Statistics showed the number of people in work in Britain has risen to its highest level since records began in 1971, with wage growth at a 10-year high.

There were an estimated 32.53m people in work in the UK between September and November 2018. That was 141,000 higher than June to August and up 328,000 on the previous year. The figure represents an employment rate of 75.8%.

The unemployment rate was 4%, the lowest since the three months to February 1975 and slightly below a consensus of 4.1%. The number of people out of work was 1.37m, up marginally on the previous three months but down 68,000 year-on-year.

Wage growth continued to outpace inflation, with average weekly earnings ahead 3.4% year-on-year including bonuses, or 3.3% excluding them - the highest annual growth rate since September to November 2008.

David Cheetham, chief market analyst at XTB, welcomed the numbers. "With inflation recently falling back close to the Bank of England’s 2.0% target, this represents a decent increase in real wages for workers which will likely aid consumption going forward.

"The pound has risen to its highest level of the week in the immediate reaction, and trades back above the $1.29 handle once more. The strong data is all the more pleasing given the ongoing uncertainty surrounding Brexit and just serves to illustrate that despite the continued headwinds, the labour market is holding up surprisingly well."

Still, sterling's strength was capped by comments from Brexit secretary Stephen Barclay, who warned MPs who are seeking an extension of article 50 that the UK may not get European agreement to delay the exit date.

Meanwhile, Brexit-related developments were still firmly in focus after Theresa May presented her 'Plan B' to Commons on Monday, which essentially amounted to little more than a more concerted effort to push her 'Plan A'. May said she would continue to seek changes on the issue of the Irish backstop, ruling out a second referendum or an extension of Article 50.

Ahead of the vote on the modified version of her Brexit deal on 29 January, MPs are putting forward plans to change the path of Brexit. These include amendments to prevent a no-deal Brexit and to extend the deadline for leaving the EU. Meanwhile, the Labour party has called for a vote in Commons on whether to hold a second referendum.

In corporate news, global mining giant BHP was on the back foot as it said second-quarter iron ore production fell 6% and reported a $600m negative impact due to production disruptions at copper and iron ore operations.

Close Brothers was in the red as the merchant bank said its performance over the five months to 31 December 2018 was solid overall, but volumes and trading income at its securities arm, Winterflood, were hit by volatile equity markets.

Elsewhere in the financial sector, IG Group slumped after the online trading group posted a 17% drop in first-half pre-tax profit.

Wood Group was the worst performer on the FTSE 100 as Exane downgraded the stock amid concerns over its accounting.

On the upside, EasyJet was the standout gainer on the top-flight index as the budget airline reported a 14% jump in total revenue, a 20% rise in ancillary revenue and a 12% increase in passenger numbers for the first quarter. It also revealed a £10m cost impact from the drone incident at Gatwick related to customer welfare costs.

Retailer Dixons Carphone gained after it backed its full-year profit guidance as it reported mixed trading over the Christmas period, with electricals sales up but mobile sales down.

RPC was in the green following a WSJ report that private equity firm Apollo Global Management could announce a takeover of the plastic packaging supplier, while thread manufacturer Coats rose as it announced the sale of its North American crafts unit for $37m.

In broker note action, Peel Hunt made a series of ratings changes, downgrading Aggreko to 'reduce' and Rentokil to 'hold', and upgrading Babcock, Restore and Equiniti to 'buy'.

Morgan Stanley cut IAG and Shell to 'underweight', while St James's Place was hit by a downgrade to 'neutral' from 'outperform' at Credit Suisse.

Market Movers

FTSE 100 (UKX) 6,921.88 -0.70%
FTSE 250 (MCX) 18,767.29 0.02%
techMARK (TASX) 3,396.41 -0.04%

FTSE 100 - Risers

easyJet (EZJ) 1,228.50p 5.77%
Ocado Group (OCDO) 912.80p 3.07%
Sainsbury (J) (SBRY) 279.70p 2.45%
Kingfisher (KGF) 222.90p 2.39%
Morrison (Wm) Supermarkets (MRW) 233.55p 2.21%
Whitbread (WTB) 4,935.50p 1.66%
Informa (INF) 685.00p 1.27%
Next (NXT) 4,785.00p 1.25%
ITV (ITV) 135.27p 1.18%
Fresnillo (FRES) 906.20p 1.16%

FTSE 100 - Fallers

Wood Group (John) (WG.) 519.80p -5.01%
Smurfit Kappa Group (SKG) 2,108.00p -2.68%
Royal Dutch Shell 'B' (RDSB) 2,343.79p -2.46%
Rio Tinto (RIO) 3,845.00p -2.19%
Royal Dutch Shell 'A' (RDSA) 2,321.00p -2.15%
BHP Group (BHP) 1,577.40p -2.09%
St James's Place (STJ) 965.00p -1.93%
GVC Holdings (GVC) 697.50p -1.90%
Glencore (GLEN) 290.45p -1.89%
Evraz (EVR) 455.10p -1.88%

FTSE 250 - Risers

Dixons Carphone (DC.) 142.50p 3.60%
Indivior (INDV) 123.60p 3.00%
Superdry (SDRY) 537.50p 2.67%
Halfords Group (HFD) 244.40p 2.60%
Just Eat (JE.) 679.80p 2.57%
NewRiver REIT (NRR) 210.50p 2.43%
Cairn Energy (CNE) 189.50p 2.38%
Equiniti Group (EQN) 217.95p 2.32%
Vivo Energy (VVO) 136.00p 2.24%
Cineworld Group (CINE) 265.80p 2.23%

FTSE 250 - Fallers

IG Group Holdings (IGG) 596.50p -6.94%
Sirius Minerals (SXX) 20.99p -6.21%
Aggreko (AGK) 714.20p -4.52%
Computacenter (CCC) 1,012.00p -3.25%
Senior (SNR) 212.40p -2.93%
Premier Oil (PMO) 71.70p -2.65%
Hunting (HTG) 548.00p -2.49%
IMI (IMI) 958.00p -2.34%
Entertainment One Limited (ETO) 385.80p -2.33%
Tullow Oil (TLW) 198.80p -2.21%