London shares dip as labour data hurts rate cut hopes

London shares experienced a slight dip on Tuesday as stronger-than-anticipated labour data contributed to a rise in the pound and government bond yields. This increase raised concerns about potential delays in interest rate cuts by the Bank of England, exerting downward pressure on equities.

The benchmark FTSE 100 index slipped by 0.1 per cent as of 0853 GMT, while the midcap FTSE 250 shed 0.3 per cent. Official figures revealed that British wage growth had slowed to its lowest pace in over a year by the end of 2023, although the deceleration was less severe than anticipated. Additionally, the nation's unemployment rate unexpectedly declined.

Following the release of the data, the sterling saw a modest uptick of nearly 0.1 per cent, while the yield on Britain's 10-year government bond also rose, further dampening investor sentiment.

Stuart Cole, the chief macroeconomist at Equiti Capital, noted, "The data very much underscores the reluctance the BoE has been exhibiting regarding any suggestion of early interest rate cuts being made." He highlighted the possibility of a reassessment of market expectations for monetary policy easing this year.

Investors are now awaiting Wednesday's release of UK inflation data, which could influence further market sentiment. Currently, market participants are pricing in around 70 basis points of interest rate cuts from the Bank of England this year, down from approximately 78 basis points prior to the labour data announcement.

Meanwhile, attention is also focused on the upcoming U.S. inflation data, expected later in the day, which may offer insights into the Federal Reserve's stance on interest rates.

In individual stock movements, GlaxoSmithKline saw a 0.9 per cent increase following an upgrade by Citigroup, driven by positive results from its multiple myeloma drug, Blenrep. AstraZeneca rose by 1.3 per cent, reversing four consecutive sessions of losses and providing support to the market.

Among midcap stocks, TUI Group performed well, climbing by 2.6 per cent after reporting a return to profit in its first quarter, signalling resilience in the travel sector despite ongoing challenges.

(With Reuters inputs)