London midday: Stocks flat ahead of US inflation; gilt yields spike

(Sharecast News) - London stocks had pared gains by midday on Tuesday as investors eyed the latest US inflation print, while gilt yields spiked as UK jobs data put pressure on the Bank of England to keep raising interest rates. The FTSE 100 was flat at 7,568.46.

Figures released earlier by the Office for National Statistics showed that the unemployment rate was a touch lower than expected in three months to April, while wage growth strengthened.

Regular pay excluding bonuses grew 7.2% in February to April, up from 6.8% in the previous three months and ahead of expectations for 6.9% growth. This marked the largest growth rate seen outside of the Covid pandemic.

Average total pay including bonuses grew 6.5% in the quarter, up from 6.1% in the previous three months and versus expectations it would be unchanged.

Meanwhile, the unemployment rate came in at 3.8%, up from 3.7% in the previous quarter but down on the 3.9% reported a month earlier and below expectations of 4.0%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "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 increases to minimum wage levels, up almost 10% partly account for the rise, and while hugely welcome for those on low incomes, it comes at a hugely tricky time when policymakers want to see spending power reduced, not bolstered, to help bring down the rate of price increases.

"The pound rose against the dollar on the news heading further towards the $1.26 mark, amid expectations that the Bank of England will keep pushing rates up, while in the United States, the Federal Reserve is poised to press pause tomorrow."

At the same time, gilt yields spiked as the strong wage growth data pointed to further interest rate hikes.

Two-year gilt yields reached 4.73%, the highest since they peaked at 4.61% in the aftermath of the government's disastrous mini budget last autumn.

Looking ahead to the rest of the day, investors were eyeing the US consumer price index for May, due at 1330 BST, as the Federal Reserve's two-day policy meeting gets under way.

In equity markets, miners Glencore, Rio, Anglo American and Antofagasta all rose after China cut borrowing costs.

Elsewhere, Plus500 surged after it bought back about 7.3m shares from Odey Asset Management, or around 8.2% of share capital, at 1,383p per share, for £101.3m.

Housebuilders tumbled amid expectations that further rates hikes by the BoE will push borrowing costs up even more. Barratt, Taylor Wimpey, Persimmon, Berkeley, Crest Nicholson, Bellway, Vistry and Redrow all fell.

It didn't help matters that Bellway said earlier that it expects lower output and average prices due to a weaker order book and an uncertain interest rate environment.

British Gas owner Centrica reversed earlier gains to trade lower despite saying annual earnings were set to be at the top end of expectations, driven by "significantly higher" profits at its retail division as customers struggle with soaring energy prices.

Equipment rental firm Ashtead edged down despite hailing a record full-year performance amid "robust" end markets and a strong performance across all geographies.

CMC Markets was also in the red after full-year results, while Admiral was knocked lower by a downgrade to 'sell' at Citi.

Market Movers

FTSE 100 (UKX) 7,568.46 -0.03% FTSE 250 (MCX) 19,175.74 -0.08% techMARK (TASX) 4,574.01 -0.03%

FTSE 100 - Risers

Glencore (GLEN) 452.05p 3.46% Rio Tinto (RIO) 5,226.00p 3.12% Anglo American (AAL) 2,479.50p 2.61% Antofagasta (ANTO) 1,485.00p 1.99% Endeavour Mining (EDV) 2,074.00p 1.97% Flutter Entertainment (CDI) (FLTR) 15,580.00p 1.23% Spirax-Sarco Engineering (SPX) 11,395.00p 1.20% Sage Group (SGE) 877.20p 1.13% Experian (EXPN) 2,975.00p 0.88% Frasers Group (FRAS) 690.50p 0.88%

FTSE 100 - Fallers

Admiral Group (ADM) 2,171.00p -6.74% Barratt Developments (BDEV) 446.10p -4.06% Taylor Wimpey (TW.) 110.20p -3.84% Persimmon (PSN) 1,180.50p -3.28% Berkeley Group Holdings (The) (BKG) 3,898.00p -2.33% British Land Company (BLND) 336.60p -2.12% Legal & General Group (LGEN) 235.30p -2.12% Land Securities Group (LAND) 597.40p -1.81% Hiscox Limited (DI) (HSX) 1,107.00p -1.51% Unite Group (UTG) 897.50p -1.37%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,498.00p 7.77% Carnival (CCL) 1,067.50p 4.20% Trainline (TRN) 283.60p 2.90% Ithaca Energy (ITH) 155.50p 2.44% Bytes Technology Group (BYIT) 528.00p 2.33% Energean (ENOG) 1,098.00p 2.23% Softcat (SCT) 1,444.00p 2.12% Ibstock (IBST) 158.30p 2.00% BlackRock World Mining Trust (BRWM) 628.00p 1.78% Renishaw (RSW) 4,240.00p 1.78%

FTSE 250 - Fallers

CMC Markets (CMCX) 162.00p -4.48% Crest Nicholson Holdings (CRST) 224.00p -4.27% Bellway (BWY) 2,150.00p -3.93% Vistry Group (VTY) 749.50p -3.91% Hammerson (HMSO) 25.56p -3.84% Redrow (RDW) 476.60p -3.13% Warehouse Reit (WHR) 89.10p -2.52% Marshalls (MSLH) 286.00p -2.46% Assura (AGR) 47.96p -2.24% UK Commercial Property Reit Limited (UKCM) 54.40p -2.16%