The FTSE 100 was marginally lower on Tuesday as London’s leading index broke down and touched the lowest level since August.
However, the declines were more benign than recent selling in UK stocks and trading down 4 points at 7,370, the FTSE 100 was well off the lowest levels of the session at the time of writing on Tuesday.
There was a tentative improvement in sentiment as expectations of a Bank of England rate hike receded after news the UK jobs market was showing signs of cooling.
That said, good news for financial markets may not necessarily translate to good news for the UK economy in the medium term.
“This isn’t the agony of a collapsing jobs market: it’s the chronic malaise of an economy growing gradually weaker. With employment falling slightly, unemployment rising, economic inactivity up and vacancies dropping again, optimism is ebbing slowly away. We need to prepare for more difficult times ahead,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.
“There’s no need to panic. Vacancies are still well ahead of pre-pandemic levels, and while there was a bump in redundancies in August, there’s no clear overall shift in job losses just yet.”
Interest rate hopes
A weaker jobs market will provide the Bank of England the ammunition it needs to hold off hiking rates at the next meeting. The prospect of rates remaining on hold is undoubtedly a positive for stocks, and the UK’s jobs news helped offset weakness in UK banks on Tuesday.
“The FTSE 100 was steady on Tuesday morning as UK jobs numbers suggested further loosening in the labour market,” said AJ Bell head of financial analysis Danni Hewson.
“With banks on the back foot thanks to Barclays’ mixed quarterly results, the miners were doing the heavy lifting for the UK’s flagship index as they moved higher on positive analyst commentary.”
Barclays shares were down around 5% at the time of writing after lowering their guidance for net interest margins as completion heats up for the UK’s retail banking customers. Investment banking activity also missed expectations.
Housebuilders provided minor support for the index on the prospect of steady interest rates for the rest of this year. Taylor Wimpey gained 0.4% and Barratt Developments added 0.2%.
As alluded to by Danni Hewson, miners rebounded from a sell-off yesterday and were among the top gainers. Rio Tinto gained 2% and Anglo American added 1%.
Bunzl was 4% lower after revenue declined in the third quarter.