Commodity giants lifted London’s main indexes on Tuesday despite concerns that the Bank of England will have to hike rates higher and faster on the back of the latest labour market figures.
The capital’s premier index climbed 0.3 per cent to 7,594.78 points, although the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell slightly to 19,188.50 points.
Miners helped the FTSE 100 record gains. Glencore topped the index, rising over five per cent, while Rio Tinto, Anglo American, Fresnillo and Antofagasta all saw strong gains.
This came on the back of stimulus measures from the Chinese central bank, which will boost demand for commodities
Further rate hikes were all but confirmed after the UK reported higher than expected wage growth in its latest labour market figures.
Numbers from the Office for National Statistics (ONS) showed the average worker in the UK received a 7.2 per cent wage increase in the three months to April, the largest barring the 7.3 per cent jump in the middle of the pandemic.
As a result, markets ratcheted up their peak rate – which has already risen dramatically in the past few weeks – to 5.75 per cent.
Susannah Streeter, head of money and markets at Hargreaves Lansdown commented: ‘’Higher than expected wage growth will help households struggling with the cost-of-living crisis but the latest labour market trends risk adding fuel to inflationary fires and are set to make the Bank of England more determined to raise interest rates to put out the flames.”
The pound rose to over $1.26 on the back of the figures, as it highlighted how much work the Bank of England still had to do to tackle inflation. In contrast, investors are expecting the Federal Reserve to press pause tomorrow rather than hike again.
The prospect of further rate hikes weighed on housebuilders on the FTSE 100. Higher rates make mortgages much more expensive, denting demand.
Persimmon, Taylor Wimpey and Barratt Developments all finished lower on Tuesday.
On the FTSE 250, property developer Bellway warned of slowing demand over the next year. It closed over 3.0 per cent lower.