UKX FTSE 100 Index

By Carla Mozee, MarketWatch

U.K. jobless rate unexpectedly rises; BOE's Carney to speak

U.K. stocks stepped lower Wednesday, as gains for Lloyds Banking Group PLC and miner Glencore PLC after earnings updates failed to offset wider losses.

The action in London echoed the losing tone set by U.S. stocks, which snapped a win streak on Tuesday.

Stocks remained lower after an unexpected rise in Britain's jobless rate, and parliamentary testimony is on the schedule for Bank of England policy makers.

How markets are moving

The FTSE 100 index shed 0.3% to trade at 7,228.52, led by falls for health-care and technology stocks. The basic materials and financial sectors were the only ones gaining ground. On Tuesday, the index closed down less than 1 point (http://www.marketwatch.com/story/ftse-100-sags-as-investors-hesitate-after-hsbc-bhp-results-2018-02-20).

The poundtraded at $1.3918, down from $1.3997 late Tuesday in New York.

The yield on the 10-year gilt fell 3 basis point to 1.54%, according to Tradeweb. Yields fall when prices rise.

Check out: More investors looking to cut U.K. assets as Brexit uncertainty persists (http://www.marketwatch.com/story/more-investors-looking-to-cut-uk-assets-as-brexit-uncertainty-persists-2018-02-16)

What's driving markets

London-listed stocks were following the track laid down by Wall Street, which was at the fore of a selloff in global equities earlier this month. U.S. stocks snapped a six-day winning streak (http://www.marketwatch.com/story/dow-futures-fall-more-than-100-points-signaling-jittery-return-to-trading-2018-02-20) on the market's return from holiday Tuesday, as a slide in shares of retailer Walmart Inc. (WMT) weighed on the S&P 500 Index .

U.K. equities remained under pressure, and the pound hit intraday lows, after data showed the country's unemployment rate rose for the first time in nearly two years, to 4.4% from 4.3% in the final quarter of 2017. The labor-market data is seen as playing a part in the Bank of England's decision-making on the path of interest rates. In November, the central bank raised rates for the first time in a decade, in the face of hotter inflation that currently stands at 3%.

Further hints on monetary policy may come in BOE Governor Mark Carney's comments on U.K inflation to a parliamentary committee.

What strategists are saying

"Though U.K. wage figures came in as expected, the pound dropped ... following a surprise jump in unemployment," said OFX currency analyst Hamish Muress in a note. "It is now the third consecutive month that wages have grown by 2.5%. Today's unemployment figures show that there is still some slack in the labor market, and until that is resolved, wages could struggle to increase beyond their current levels."

Economic data

As well as the jobless rate, the Office for National Statistics said wages in the three months to December grew by an average 2.5% (http://www.marketwatch.com/story/uk-jobless-rate-unexpectedly-increases-2018-02-21), compared with a 2.4% FactSet consensus estimate. But with inflation at 3%, but wage growth is still outpaced by inflation which is running at 3%.

"Wages are heading in the right direction, though the rate of growth is hardly jaw-dropping, and significantly still lags behind the rate of inflation," wrote Laith Khalaf, senior analyst at Hargreaves Lansdown. "That means the consumer squeeze is still alive and well, and the pick-up in wage growth anticipated by the Bank of England is yet to materialize."

Carney will appear alongside other BOE policy makers to discuss the February Inflation Report with the Treasury Select Committee, at 2:15 p.m. London time, or 9 a.m. Eastern Time.

The release of minutes from the Federal Reserve's January policy meeting, the last chaired by Janet Yellen, comes at 2 p.m. Eastern Time, or 7 p.m. London time. These will be combed for clues to the central bank's thinking on interest rates, which can have a knock-on effect on global financial markets.

Read:Five things to watch in the Fed minutes (http://www.marketwatch.com/story/five-things-to-watch-in-the-fed-minutes-2018-02-20)

Stock movers

Lloyds Banking Group PLC shares (LLOY.LN) climbed 2% after the lender said it's launching a share buyback of up to GBP1 billion ($1.40 billion) (http://www.marketwatch.com/story/lloyds-launches-1-billion-buyback-2017-profit-up-2018-02-21). In the bank's first full-year results since returning to full private ownership, pretax profit of GBP5.28 billion for 2017 missed expectations of GBP5.89 billion.

Glencore PLC shares (GLEN.LN) leapt 4.1%. The miner and commodities trader posted a more than fourfold rise in 2017 net profit for 2017 (http://www.marketwatch.com/story/glencore-profit-up-fourfold-for-2017-beats-views-2018-02-21), of $5.78 billion, and said it was considering acquisitions.

Barratt Developments PLC shares (BDEV.LN) fell 0.9%, turning lower during the session. The shares had been higher after the home buidler raised both its regular and special dividends (http://www.marketwatch.com/story/barratt-lifts-dividends-after-profit-rises-2018-02-21). It also said first-half pretax profit rose as it sold more plots at higher prices.

AA PLC shares (AA.LN) on the mid-cap FTSE 250 index plunged 22% as the roadside assistance slashed its dividend and issued a profit warning.

(END) Dow Jones Newswires

February 21, 2018 06:46 ET (11:46 GMT)

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