13th Nov 2013 10:40
LONDON (Alliance News) - The number of people claiming unemployment unemployment benefits dropped by 41,700 in October, more than the 35,000 expected by economists. The headline rate of unemployment also came in better than forecast, at 7.6%, down from 7.7%, meaning the level of unemployment in the UK is now at its lowest level since April 2009.
The pound jumped to a intraday high against the dollar of USD1.5972 and also gained against the euro, making a high of GBP0.8426, as traders thoughts turn to an early interest rate rise due to the strong employment report. Meanwhile UK stocks have continued to slide on the prospect of tighter monetary policy.
By mid-morning Wednesday the FTSE 100 is down 0.8% at 6,671.40, the FTSE 250 is down 0.7% at 15,263.95, and the AIM All-Share is down 0.4% at 805.90.
Miners are leading the declines; the FTSE 350 sector is down 1.7%. BHP Billiton is down 1.8% after the Anglo-Australian mining giant announced the suspension of mining at its Nickel West Leinster Perseverance Underground operation.
The Electricity and Utilities sectors are performing the best, with Drax Group up 3.7%, one of the best FTSE 250 performers. Drax raised its full-year forecasts after saying that trading conditions had remained strong in recent months, with contracted sales up at the coal-fired units at its power station.
Sainsbury is the fastest gaining blue chip stock, up 3.9%. The UK supermarket chain said its market share had reached the highest level for a decade, as it kept outperforming its main rivals with strong sales and profit growth in the first half of the financial year.
Global stocks have been struggling throughout the morning, with uncertainty surrounding both the timing of the tapering of the US Fed's bond-buying programme and Chinese economic reforms. "The 3rd Party plenum concluded with only a vague statement of intent to reform rather than including any of the practical measures that had been on China-watchers? wish lists", says Rabobank analyst Michael Every.
In a TV interview with CNBC, US Treasury Secretary Jack Lew said that China needs to be more clear, and "spell out its policies". The reforms "can't just be a banner, there has to be some details underneath it", Lew says.
Major European markets are lower, with the CAC40 and the DAX both down about 0.3%, while US futures currently indicate a similarly lower open for New York.
Back in the UK, even ahead of the Bank of England's last inflation report of the year, economists were re-calculating predictions on when the unemployment rate will reach the target of 7.0%, set by the central bank before it will raise interest rates from historic lows.
The unemployment rate has now fallen from 7.8% in July, to 7.6% in October. If that rate were to continue, the Bank of England's 7% threshold would be reached in the fourth quarter of 2014, nearly two years ahead of the time-frame suggested at the time of the introduction of forward guidance.
Concern remains over UK wage growth however. Average wage growth in the three months to September was 0.7%, as expected. "Although the drop in inflation is a welcome development for UK consumers, annual prices remain more than twice annual wage growth", says FOREX.com Research Director Kathleen Brooks.
All eyes are on Mark Carney at the press conference he is currently holding following the release of the BoE's inflation report, with questions sure to focus on his forward guidance and if it may need to change given the strong economic performance in the UK.
By Jon Darby; [email protected]; @jondarby100
Copyright © 2013 Alliance News Limited. All Rights Reserved.
Related Shares:
DraxSainsbury'sBHP Group