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LONDON MARKET CLOSE: FTSE 100 rises on favourable UK pay data

17th Oct 2023 16:56

(Alliance News) - Equities in London ended higher on Tuesday, outperforming European peers as interest rate sensitive stocks shone after favourable UK wage data took some pressure off the Bank of England.

There was more trepidation elsewhere. What is customarily good news as far as US data goes was bad news again for equities, adding to Federal Reserve interest rate worries. The tech-heavy Nasdaq Composite struggled, meanwhile, as investors mull over export curbs of US chips.

Worries related to the Israel-Hamas conflict continue to cast a dark cloud over markets, as US President Joe Biden prepares for a trip to the Middle East.

The FTSE 100 index added 44.58 points, 0.6%, at 7,675.21. The FTSE 250 was up 170.07 points, 1.0%, at 17,689.46, and the AIM All-Share rose 3.77 points, 0.6%, at 690.58.

The Cboe UK 100 rose 0.6% at 767.04, the Cboe UK 250 added 1.0% at 15,343.98, and the Cboe Small Companies edged up 0.1% at 12,812.99.

In European equities on Tuesday, both the CAC 40 in Paris and the DAX 40 in Frankfurt added 0.1%.

Stocks in New York were largely lower. The Dow Jones Industrial Average was flat at the time of the European close, the S&P 500 was down 0.1% and the Nasdaq Composite 0.3% lower.

Weighing on tech shares were tighter US chip exports, aimed at making it increasingly difficult for cutting-edge semiconductor technology to fall into Chinese hands. Nvidia, one of those at the heart of the artificial intelligence revolution in the sector, slumped 4.2%. Advanced Micro Devices was down 0.9%

US data on Tuesday reinforced higher for longer interest rate worries.

US retail sales grew at a faster pace than expected last month, numbers on Tuesday showed, as the US consumer shows continued resilience in the face of robust Federal Reserve interest rates.

According to the Census Bureau, retail sales increased 0.7% on-month in September, beating the FXStreet-cited consensus of a 0.3% climb. Growth eased from the 0.8% rise registered in August from July. August's reading was upwardly revised from a 0.6% rise.

Analysts at ING commented: "Coupled with the recent strong jobs numbers and hot inflation it is no surprise that Treasury yields push higher. While Fed officials may be coalescing around the view that further policy rate hikes may not be needed, the prospect of interest rate cuts is in the far-off future and the yield curve needs to continue repricing for that."

The outlook for US monetary will be on the agenda again on Wednesday, Fed New York President John Williams, Philadelphia President Patrick Harker, Richmond President Thomas Barkin and Board Governor Michelle Bowman are on the docket on Wednesday.

While the US data was hotter-than-expected, a UK pay growth reading gave the Bank of England less of a headache.

According to the Office for National Statistics on Tuesday, in the three months to August, annual growth in average total pay, excluding bonuses, cooled to 7.8%. This was in line with market consensus, as cited by FXStreet. The figure for the previous three-month period was revised upwards to 7.9% from 7.8%.

Including bonuses, average pay growth eased to 8.1%, which undershot market expectations of 8.3%. It was 8.5% in the three months to July. The figure including bonuses was affected by the one-off payments made in June through August to NHS and civil service staff, the ONS noted.

A Bank of England policymaker believes downward forces on wage growth will persist, helping in the fight to contain inflation, Reuters reported on Tuesday.

Swati Dhingra, a member of the BoE's nine-person strong monetary policy committee, said it is difficult to see where "further momentum in wage growth is going to come from".

"We should see some relenting of domestic inflationary pressures," Dhingra told an event hosted by the Royal Economic Society, Reuters reported.

The BoE's next interest rate decision is on November 2.

Before then, there is an all-important UK consumer price index reading at 0700 BST on Wednesday. This is expected to show the UK annual inflation rate eased to 6.5% last month from 6.7% in August, according to FXStreet-cited market consensus. The core inflation is predicted to cool to 6.0% from 6.2%.

Interest rate sensitive stocks in London ended higher. Insurer Beazley climbed 1.7%, while housebuilder Taylor Wimpey and retailer JD Sports both rose 2.2%.

Sterling was quoted at USD1.2191 late Tuesday afternoon, slightly lower than USD1.2194 at the London equities close on Monday. The euro rose to USD1.0581 from USD1.0548. Against the yen, the dollar was quoted at JPY149.74, up against JPY149.56.

Events in the Middle East are also in focus. Biden prepared for a trip to the Middle East aimed at preventing the Israel-Hamas conflict spreading across the region.

His trip comes as Israeli Prime Minister Benjamin Netanyahu lined up forces on the Gazan border ahead of an expected ground incursion as Tel Aviv retaliates after deadly October 7 attacks by Hamas militants.

Biden was to meet Netanyahu, and will also see Jordanian King Abdullah II, Palestinian leader Mahmud Abbas and Egyptian President Abdel Fattah al-Sisi in hopes of finding a way to de-escalate a crisis that threatens the stability of the region.

The Pentagon has put 2,000 troops on deployment alert to be able "to respond quickly to the evolving security environment in the Middle East". US media said the troops would cover support roles such as medical assistance and handling explosives.

"The markets remain on edge. The press reports US President Biden is planning an imminent trip to Israel while Iran warns of "multiple fronts" against Israel if the attacks on Gaza continued," Bannockburn Global Forex analyst Marc Chandler commented.

Back in London, Digital 9 Infrastructure jumped 18% as it said it has retained Goldman Sachs International as a financial adviser to support the development of "a set of actions focused on maximising shareholder value".

It said the move followed a consultation with shareholders after some had given feedback about the company's dividend policy and "future direction".

In late-September, the firm withdrew its dividend target.

Digital 9 is managed by Triple Point Investment Management and invests in assets such as data centres, subsea fibre cables, and mobile phone masts., boosted by consumers turning to the price comparison site in pursuit of a better deal to keep a lid on bills, added 9.4%.

In the three months that ended September 30, revenue rose 14% to GBP115.6 million from a year earlier.

Gold was quoted at USD1,924.08 an ounce late Tuesday afternoon, up from USD1,921.22 on Monday. Brent oil was trading at USD89.41 a barrel, lower than USD90.19.

Wednesday's economic diary has a gross domestic product reading from China overnight. Following the morning's UK inflation data, there is also a eurozone reading at 1000 BST.

The local corporate calendar has trading statements from gambling firm 888, miner Antofagasta, property investor Segro and wealth management company Quilter. Premier Inn owner Whitbread reports half-year results.

By Eric Cunha, Alliance News news editor

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