11th Sep 2013 09:43
LONDON (Alliance News) - The rate of unemployment in the UK dropped to 7.7% between May and July from 7.8% in the previous three months. The number of people unemployed fell 24,000 in the period to 2.49 million. The number of people claiming Jobseekers' Allowance fell 32,600 to 1.4 million, which was its lowest level since February 2009.
The most important UK data release so far this week caused a small dip in the FTSE 100 and a huge spike in the pound to a new 7-month high of 1.5826 as traders see the 0.1% reduction in unemployment as one step closer to interest rate hikes, the key driver of exchange rates. The BoE's target for unemployment before interest rates are reviewed is 7%. The stock market dip came as traders now see each drop in unemployment a step closer to reigning in of bond purchases by the central bank and a tightening of liquidity.
The FTSE 100 quickly recovered from the dip, however, and by mid-morning Wednesday trades down just 0.1%. The FTSE 250 trades up about 0.2%, while AIM listed stocks continue to show remarkable strength with the AIM All-Share up more than 1.1%.
European indices are generally trading fairly flat on the day, continuing to wait for news out of the US on the developing debate over action in Syria. US President Obama addressed the nation Tuesday, saying that he would put the scheduled vote on military action in the US Congress on hold. Obama said that while diplomacy aimed at placing Syria's chemical weapons under international control has produced some "encouraging signs," it is too early to know if they would succeed.
Technology stocks drive the gainers on the FTSE 100 Wednesday. Following last night's unveiling of Apples new iPhone, ARM Holdings, which designs 64-bit processors used in the new devices, has rallied more than 3%. The use of 64-bit processors in smart phones hadn't been expected until later in the year, causing the jump in ARM shares.
Glencore Xstrata also is showing solid gains, up 1.6%. After talk that the deal to takeover Xstrata may have been too expensive, investors are impressed with the USD2 billion in annual cost savings from the deal highlighted at Glencore's Investor Day on Tuesday.
Other than the UK unemployment numbers it's a fairly quiet day in the economic calendar, just a speech from UK Monetary Policy Committee member David Miles of interest at 1530BST.
By Jon Darby; [email protected]; @jondarby100
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