The FTSE 100 was on course to breach record highs on Tuesday despite several UK economic data releases pointing to a slowdown in the UK’s jobs market and retail sector.
Today’s gain served as a reminder that the FTSE 100 is not a representation of the UK, as the index added over 0.5% in early trade, driven largely by a weaker pound and hopes that the Bank of England would soon cut interest rates again.
The housebuilders surged higher on Tuesday as investors positioned for an easing of monetary policy that could help support demand for new build properties. A strong trading statement from Bellway also helped bolster the sector.
“UK housebuilders were at the top of the wish list for many investors after Bellway reported ‘robust’ spring trading. It was enough to drive a rally in the sector, putting the likes of Persimmon, Barratt Redrow and Taylor Wimpey at the top of the FTSE 100 risers’ list,” explained AJ Bell’s Russ Mould.
Persimmon was the FTSE 100’s top risers with a gain of 4%.
The Bank of England has been measured in the pace of its interest rate cuts, pointing to higher inflation and relatively robust economic as reasons to be cautious. However, today’s data will pile pressure on the voting members of the MPC to take action to prevent any further deterioration in economic conditions.
This was reflected in a weaker pound against the dollar, which helped London’s overseas earners gain. Diageo, Shell, and Ashtead were all heading higher.
UK jobs market
UK unemployment is on the rise. The number of people on UK payrolls fell the most since the beginning of the pandemic in May.
“The first labour market data since the rise in National Insurance contributions and the increase in the National Living Wage has been effective and suggests that employers have responded to rising labour costs by scaling back their workforce and hiring plans,” said Seemanti Ghosh, Principal Economist at the Institute for Employment Studies.
“The number of payrolled employees in the UK declined further between March and April 2025, potentially reflecting employers’ reactions to new cost pressures, alongside wider economic uncertainty.”
The first month following the introduction of Rachel Reeves’ national insurance ‘jobs tax’ saw employers slash 109,000 staff from payrolls. The unemployment rate increased to 4.6%.
The positive market reaction for UK stocks to what is by no means good news is predominantly the result of investor positioning for a response by the authorities. Either a Bank of England rate cut or a scrapping of the national insurance hikes by the Chancellor are entirely plausible reactions, given that the slowing job market has been manufactured by a seemingly economically illiterate government.