By Carla Mozee, MarketWatch

U.K. jobless rate unexpectedly increases; wage growth to rise, says BOE officials

U.K. stocks finished higher Wednesday, reversing course as gains for shares of Lloyds Banking Group PLC and Glencore PLC, which released financial updates, accelerated during the session.

Stocks in London overcame the losing tone set early by U.S. stocks, which snapped a win streak in the previous session. Meanwhile, the pound was whipped around after economic data and parliamentary testimony by Bank of England policy makers.

How markets moved

The FTSE 100 indexrose 0.5% to end at 7,281.57. The moves came as industrial, consumer services, health care and utility stocks joined the basic materials and financial sectors in gaining ground. The consumer goods, oil and gas and telecom sectors fell. 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 $1.3951, down from $1.3997 late Tuesday in New York.

The yield on the 10-year gilt fell 1 basis point to 1.55%, 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

An early decline in London blue-chips had followed the track lay down by Wall Street, with U.S. stocks on Tuesday snapping 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). The U.S. market has been in focus after fronting a global selloff in equities earlier this month. But U.S. stocks on Wednesday were stepping back into recovery mode, providing a lift for broader European stock markets .

Shares of Lloyds Banking Group, among the top 10 biggest components of the FTSE 100, bulked up as the session wore on. In the bank's first full-year results since returning to full private ownership, pretax profit climbed, although it was below expectations.

"Waiting in the wings is a dividend yield of 4% (projected 6.6%) which may return the bank to the halcyon days of being an investor's core-portfolio essential, given the generous and stable dividend," said Richard Hunter, head of markets at Interactive Investor, in a note.

The pound early Wednesday hit an intraday low of $1.3905 after data showed the U.K.'s unemployment rate unexpectedly rose to 4.4% 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%.

But the pound in afternoon trade briefly topped $1.40 as BOE officials at a parliamentary committee hearing said they soon expect to see strengthening in salaries for Britons.

Economic data

As well as posting 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).

Bank of England policy makers, at a Treasury committee meeting in London, reaffirmed their view that pay growth is on the rise. Andrew Haldane, the central bank's chief economist, said wage pressures were weak early in 2017, and, "arithmetically, given what we've seen over the past few months, it's very likely average weekly earnings growth will nudge up to have a '3' in front of it, which is our forecast for Q1."

Minutes from the Federal Reserve's January policy meeting, the last chaired by Janet Yellen, are due 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)

What strategists said

"Lloyds is grabbing the attention of the markets today," said Joshua Mahony, market analyst at IG, in a note. "Question-marks over whether the government's stake would hold the firm back have been firmly answered, with the bank posting the highest pre-tax profit since 2006," he said.

"With the Bank of England pointing towards three rate hikes in the coming years, there is reason to believe that Lloyds will emerge as one of the main investment plays to take advantage of that shift given their recent re-emergence into fully private hands."

Stock movers

Lloyds (LLOY.LN) climbed 2.8% 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). Pretax profit of GBP5.28 billion for 2017 missed expectations of GBP5.89 billion.

Glencore PLC shares (GLEN.LN) leapt 5.2%. 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) rose 0.9% after turning lower during the session. The home builder 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 midcap FTSE 250 index plunged 28% as the roadside assistance slashed its dividend and issued a profit warning.

 

(END) Dow Jones Newswires

February 21, 2018 12:41 ET (17:41 GMT)

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