UKX FTSE 100 Index

By Sara Sjolin, MarketWatch

Vodafone slumps after news of CEO's planned departure

U.K. stocks closed higher on Tuesday after a mixed jobs report that was seen as easing pressure on the Bank of England to raise interest rates.

Shares of Vodafone added pressure on the London benchmark after news the CEO is leaving.

What are markets doing?

The FTSE 100 index ended 0.2% higher at 7,722.98, logging its highest close since Friday.

The pound traded at $1.3509, compared with $1.3556 late Monday in New York. Sterling has lost more than 5% against the dollar over the past month as expectations of an imminent rate increase dwindled following dovish comments from BOE Gov. Mark Carney and a string of disappointing data. A weaker pound tends to boost the FTSE 100 as the index's components make the bulk of their earnings overseas, with a softening sterling lifting revenues when converted back into the U.K. currency.

The pound drop was also a function of a rally in the dollar (http://www.marketwatch.com/story/dollar-rises-a-second-day-as-trade-talks-retail-data-take-center-stage-2018-05-15), which came after upbeat U.S. retail sales data were seen as highlighting the economy's steady momentum.

What is driving the market?

All eyes were on the U.K. jobs data. The unemployment rate remained at a 42-year low of 4.2% in March, while wages without bonuses advanced 2.9%, up from 2.8% in February. However, earnings including bonuses slipped to 2.6% from 2.8%.

Carney said last week at the central bank's quarterly inflation report news conference that interest rates will rise over the next three years, if the economy evolves as the bank forecasts. The comments were seen as adding extra weight to the macroeconomic data coming out of the U.K.

What are strategists saying?

-- "Today's labor market report illustrates the conundrum faced by the Bank of England. A strong labor market should push wage pressures higher in the months ahead, requiring the Bank to hike rates in order to ward off future inflation pressures," said Dean Turner, economist at UBS Wealth Management, in a note.

"But, all the while that the data shows a struggling consumer, it is difficult to have confidence that the time for tighter monetary policy is now. In our view, this points to the bank keeping rates on hold for a little while longer," he added.

-- "Today's data adds further weight to our view that pay growth is moderating, not firming. Since the [BOE] has tended to attach more weight to wage growth than the unemployment rate as a signal of slack in the labor market, it is consistent with our view that the [BOE] will not hike this year," said Daniel Vernazza, chief U.K. economist at UniCredit, in a note.

Stock movers

Shares of Vodafone Group PLC (VOD.LN) (VOD.LN) dropped 4.3% after the telecom giant said its chief executive Vittorio Colao will step down (http://www.marketwatch.com/story/vodafone-cfo-to-succeed-ceo-colao-in-october-2018-05-15) and be succeeded by Chief Financial Officer Nick Read, effective Oct. 1.

EasyJet PLC (EZJ.LN) rose 3.3% after the budget airline said its pretax loss for the first half of fiscal 2018 narrowed (http://www.marketwatch.com/story/easyjet-first-half-loss-narrows-on-higher-revenue-2018-05-15), driven by record revenue a reduction in capacity by other airlines.

House builders were on the rise after Taylor Wimpey PLC (TW.LN) said it plans to declare a special dividend for 2019 of GBP350 million pounds ($475.1 million) (http://www.marketwatch.com/story/taylor-wimpey-to-declare-special-dividend-in-2019-2018-05-15). That will increase total dividends for the year by 20%. Shares of Taylor Wimpey rose 3.7%, Berkeley Group Holdings PLC (BKG.LN) climbed 1.5% and Persimmon PLC (PSN.LN) rose 1.8%.

Outside the FTSE 100, shares of CYBG PLC (CYBG.LN) slid 5.6% after the bank reported disappointing earnings and said the U.K. environment remains challenging.

(END) Dow Jones Newswires

May 15, 2018 12:18 ET (16:18 GMT)

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