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London close: FTSE ends up as Lloyds, Glencore rally; pound slips on jobs data
London stocks reversed earlier losses to end Wednesday's session higher, helped along by well-received results from the likes of Lloyds and Glencore, as the pound slipped following an uptick in the UK unemployment rate.
The FTSE 100 closed up 0.5% at 7,281.57, as the pound fell 0.3% versus the dollar to 1.3949 and 0.2%% against the euro to 1.1326 after figures revealed that UK unemployment unexpectedly rose at the end of last year, while wage data was mixed. A weaker pound tends to benefit the top-flight index as around 70% of its constituents derive most of their earnings from overseas.
Sterling was off earlier lows, however, having briefly turned higher after Bank of England governor Mark Carney and other policymakers suggested that the BoE could raise rates again as early as May.
The headline unemployment rate for the three months to December rose to 4.4% from 4.3% a month earlier, at which level it was expected to remain. This was the first increase in the unemployment rate in nearly two years.
The Office for National Statistics also revealed an 88,000 increase in employment change in the period, which was half the 165,000 expected, but that it was a rise in the participation rate that pushed the unemployment rate up.
More timely data on the January claimant count showed a 7,200 decline to 0.823m, versus an expected 4,100 increase.
UK average weekly earnings for the three months to December remained 2.5% higher than the same period a year before for the third consecutive reading, as expected, though it jumped by 2.8% if the month of December was taken alone.
Growth in weekly earnings excluding bonuses rose to 2.5%, higher than the average estimate of 2.4% and the figure for the month before, which was revised down to 2.3%. And private sector pay growth accelerated to 2.6% from 2.3%.
With consumer price inflation at 3.0%, the stubbornly low wage growth means household real incomes continue be squeezed.
Earnings also helped to underpin the FTSE on Wednesday. Lloyds Banking Group rose despite missing expectations on full-year profit, as it announced a £1bn share buyback and increased its annual dividend by a fifth.
Joshua Mahony at IG said: "Lloyds is grabbing the attention of the markets today, as the UK bank pushes onwards and upwards in its first year as a private bank post-crisis. Question-marks over whether the government's stake would hold the firm back have been firmly answered, with the bank posting the highest pre-tax profit since 2006. With the Bank of England pointing towards three rate hikes in the coming years, there is reason to believe that Lloyds will emerge as one of the main investment plays to take advantage of that shift given their recent re-emergence into fully private hands."
Glencore gained after it declared a $2.9bn dividend to be paid out in two equal instalments in 2018 as profits surged higher and it looked confidently to the future.
Fidessa was flying high again as it agreed to a £1.4bn takeover by Swiss banking software company Temenos a day after confirming that the two were in talks.
Spire Healthcare racked up strong gains as the FT reported market chatter regarding possible interest from US rival HCA in taking Mediclinic's 29.9% stake in Spire off its hands.
Housebuilder Barratt Developments edged up after posting a record first-half profit thanks to strong demand, while Unite Group ticked higher as it launched a £170m placement to fund two near university projects and said pre-tax profit rose 14% in the year t the end of December.
On the downside, roadside assistance and insurance company AA tanked after warning on profits and slashing its dividend, while Metro Bank slumped even as it reported record results and its first annual profit, as underlying pre-tax profit missed expectations.
Capital & Counties retreated after it said its Earls Court interests were now valued at 1bn, down from £1.1bn in 2016, and posted a drop in full-year revenues to £87.7m from £94m.
Hochschild Mining was in the red as it reported a drop in full-year earnings on the back of higher costs and increased investment in brownfield exploration, but said production is expected to double this year.
FirstGroup tumbled after saying annual earnings are expected to be slightly lower, while Polymetal ticked down as it signed its first offtake contract for Kyzyl concentrate.
In broker note action, BT was upgraded to 'hold' at Deutsche Bank, while 3i Infrastructure was lifted to 'buy' at Jefferies.
HSBC was cut to 'hold' by Societe Generale and Dunelm was downgraded to 'equalweight' from 'overweight' by Barclays.
Still to come, market participants will eye the release of the minutes from the FOMC meeting at the end of January.
David Morrison, senior market strategist at GKFX, said: "The market has just about fully priced in the likelihood of three 25 basis point rate hikes in 2018. This brings it in line with the FOMC's forecast taken from the committee's Summary of Economic Projections in December last year. However, the recent spike in inflation as measured by the latest CPI and average hourly earnings releases has begun to impact expectations going forward.
"There is growing feeling that the Fed may be in danger of falling behind the curve when it comes to tightening monetary policy. Therefore, there's growing speculation that tonight's minutes may indicate a shift towards raising rates by a full percentage point this year - something yet to be priced in by markets."
Market Movers
FTSE 100 (UKX) 7,281.57 0.48%
FTSE 250 (MCX) 19,788.89 -0.07%
techMARK (TASX) 3,348.38 0.30%
FTSE 100 - Risers
Glencore (GLEN) 404.55p 5.24%
Anglo American (AAL) 1,801.40p 3.54%
Mediclinic International (MDC) 605.00p 2.89%
Lloyds Banking Group (LLOY) 69.72p 2.76%
InterContinental Hotels Group (IHG) 4,686.00p 2.58%
TUI AG Reg Shs (DI) (TUI) 1,579.00p 2.37%
Relx plc (REL) 1,522.50p 1.98%
AstraZeneca (AZN) 4,814.00p 1.95%
London Stock Exchange Group (LSE) 4,079.00p 1.85%
Old Mutual (OML) 253.00p 1.69%
FTSE 100 - Fallers
Shire Plc (SHP) 2,992.00p -2.62%
WPP (WPP) 1,379.00p -1.50%
British Land Company (BLND) 639.80p -1.20%
Evraz (EVR) 427.50p -1.20%
Smurfit Kappa Group (SKG) 2,609.69p -1.15%
Reckitt Benckiser Group (RB.) 5,869.00p -1.00%
British American Tobacco (BATS) 4,450.00p -0.96%
Morrison (Wm) Supermarkets (MRW) 221.90p -0.63%
BP (BP.) 472.20p -0.59%
Land Securities Group (LAND) 933.10p -0.58%
FTSE 250 - Risers
Spire Healthcare Group (SPI) 246.60p 5.84%
Lancashire Holdings Limited (LRE) 593.00p 5.61%
RHI Magnesita N.V. (DI) (RHIM) 4,475.00p 5.05%
Fidessa Group (FDSA) 3,750.00p 5.04%
Equiniti Group (EQN) 289.50p 3.95%
SSP Group (SSPG) 631.50p 3.44%
Marshalls (MSLH) 421.00p 3.44%
Sirius Minerals (SXX) 24.83p 3.27%
NewRiver REIT (NRR) 314.50p 3.11%
Homeserve (HSV) 741.00p 3.06%
FTSE 250 - Fallers
AA (AA.) 83.58p -28.13%
FirstGroup (FGP) 84.40p -12.13%
TalkTalk Telecom Group (TALK) 94.50p -6.16%
Capita (CPI) 171.35p -5.02%
Hochschild Mining (HOC) 209.90p -4.63%
Dignity (DTY) 761.50p -4.51%
Inmarsat (ISAT) 459.00p -4.12%
Vectura Group (VEC) 74.30p -4.07%
Sanne Group (SNN) 606.00p -3.96%
Hikma Pharmaceuticals (HIK) 950.00p -3.61%