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(Alliance News) - Stock prices in London were mostly higher at midday on Tuesday with the Bank of England remaining likely to cut rates in February, despite rising earnings.
"The FTSE 100 was subject to choppy trading following [US President] Trump's inauguration," AJ Bell's Russ Mould said. "Having jumped at the market open, the UK index quickly pulled back as investors were unsure as to whether they needed to position their portfolio defensively in anticipation of sweeping changes under the new US president, or whether to keep the foot on the accelerator with growth stocks."
Figures from the Office for National Statistics showed average earnings in the UK excluding bonuses increased 5.6% annually in the three months that ended November 30, while the unemployment rate rose above analysts' forecast.
However Barclays says that while the wage strength adds uncertainty for the BoE, the broad picture is unchanged. The Monetary Policy Committee is therefore still likely to vote for a rate cut in February, followed by four more 25bp cuts this year in May, June, August and September.
"On the face of it the latest UK jobs figures create something of a headache for the Bank of England," said AJ Bell's Danni Hewson. "For the first time since summer 2021 wage growth really feels like wage growth, with the average earner enjoying a 3.4% boost as inflation cooled...The potential impact on inflation is clear but the flipside shows a weakening labour market, fewer vacancies and a rising number of those unemployed and claiming benefit.
"Markets therefore still feel comfortable that the MPC will see through this lot of wage data and deliver a rate cut at the February meeting."
The FTSE 100 index was down 1.63 points at 8,518.91. The FTSE 250 was up 68.63 points, 0.3%, at 20,555.37, and the AIM All-Share was up 0.58 points, 0.1%, at 718.87.
The Cboe UK 100 was down 0.1% at 853.80, the Cboe UK 250 was up 0.2% at 17,955.19, and the Cboe Small Companies was up 0.9% at 15,836.92.
On the FTSE 100, Lloyds Banking led with a 4.1% gain.
RightMove was the biggest loser, down 1.9% after broker Jefferies cut the property portal firm to 'underperform' from 'hold', and slashed its price target to 495 pence from 720p.
4imprint was the biggest FTSE 250 winner, up 8.3%.
The direct marketing company expects pretax profit in 2024 to be not less than USD153 million, up 8.7% on-year and above the upper end of analysts' forecasts. Revenue is seen 3.0% higher at USD1.37 billion.
"The group made solid operational progress in 2024, despite a challenging market backdrop," the firm said in a statement.
Down the other end, Qinetiq lost 11%.
The defence technology firm still expects high single digit organic revenue growth for the full year, but noted that UK short-term orders had been slower than expected "due to the fiscal environment".
As a result, Qinetiq said it has moved to "resize some of our capabilities" in its UK intelligence arm.
As for small-caps, Marston's lost 3.1% despite a confident trading update.
The pub operator said it expects to meet market expectations for GBP68.3 million in underlying pretax profit for financial 2025, up 62% on-year, after a "particularly strong key festive trading period".
"However, the before and after periods weren't good as the company blamed the weather for more sluggish trading in November and January," Mould noted.
He said Marston's "now needs to demonstrate it can deliver sustainable growth, an improvement in cash flow and contend with rising costs arising from the Budget".
In European equities on Tuesday, the CAC 40 in Paris was up 2.29 points, while the DAX 40 in Frankfurt was down 0.1%.
The pound was quoted lower at USD1.2240 at midday on Tuesday in London, compared to USD1.2298 at the equities close on Monday. The euro stood lower at USD1.0354, against USD1.0399. Against the yen, the dollar was trading higher at JPY155.90 compared to JPY155.69.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.4%, and the Nasdaq Composite up 0.4%.
"The big surprise was a lack of immediate action on trade tariffs as part of Trump's initial list of executive orders," Mould commented, although the convicted felon did follow this up with a "threat to apply up to 100% tariffs on Chinese imports if Beijing doesn't agree to sell at least half of TikTok's American operations to a US company".
"The one area where Trump took decisive action was [undocumented] immigration and this poses a big threat to labour costs in the US," Mould continued. "It threatens to reduce the pool of workers for construction and agricultural industries, meaning companies might have to pay more to attract staff. Trump promised to lower prices for the American public, yet already on day one we've got policies in action that have inflationary consequences."
Brent oil was quoted lower at USD78.02 a barrel at midday in London on Tuesday from USD79.69 late Monday.
Gold was quoted higher at USD2,721.35 an ounce against USD2,707.18.
Still to come on Tuesday's economic calendar is the consumer price index from Canada.
By Emma Curzon, Alliance News reporter
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