London’s FTSE 100 gave up gains today as fresh data yielded tentative signs that the UK workforce is rebalancing and telecoms giant Vodafone tumbled quickly.
The capital’s premier index fell 0.34 per cent to 7,751.07 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, was broadly flat, closing at 19,272.72 points.
Market sentiment was initially strengthened today after numbers from the Office for National Statistics revealed pay growth is cooling and more people are returning to the workforce, potentially signalling inflationary pressures are set to unwind.
Earnings excluding bonuses rose 6.7 per cent over the last year, below the City’s expectations but a rise from the previous period.
A record net 241,000 outflow from economic inactivity means the UK’s labour supply is recovering after being squeezed by a jump in people taking early retirement and long-term ill health.
That labour market easing could convince the Bank to pause raising rates at its meeting next month. Strong wage growth tends to strengthen inflation by incentivising firms to raise prices to shield their finances from rising costs.
Higher interest rates tend to weigh on stocks by making other assets more attractive and knocking consumer demand, which crimps companies’ income.
“Worries remain about wage growth, which remained at 0.6 per cent in March compared to February so a lot will be riding on the next set of inflation data,” Susannah Streeter head of money and markets at Hargreaves Lansdown, said.
Its shares collapsed 7.44 per cent and to the bottom of the premier index.
Middle class favourite and online supermarket Ocado also traded near the bottom of the FTSE 100 today, shedding around 3.5 per cent after investment bank Goldman Sachs trimmed its share price guidance for the firm.
Fresh figures illustrating the Chinese economy – the world’s second largest – is chilling also weighed on risk appetite.
Retail sales grew sharply at 18.4 per cent, but that was below expectations, as was the 5.6 per cent factory output figure.
Aerospace giant Rolls-Royce was the top performer, advancing 2.1 per cent. Housebuilders also did well, likely investors warming up to the idea that UK rates may have peaked at 4.5 per cent after last week’s twelfth straight rise.
The pound weakened around 0.3 per cent against the US dollar.