Sterling has received a boost this morning after the release of the latest UK employment data showed a faster than expected rise in wage growth. The market has seemingly looked through an increase in the claimant count change to focus on the earnings component and rise above the 1.25 handle against the US dollar. The EURGBP rate has fallen to its lowest in over 6 weeks since the release. The FTSE 100 has made another bright start and risen by 25 points at the time of writing.
Further signs of inflation
This morning’s rise in wages supports Tuesday’s CPI beat in suggesting greater inflationary pressures in the UK economy. A 2.3% increase in the 3month/year reading is the 10th in a row since the Brexit vote to come in above 2.0% - the upper bound for the Bank of England’s inflation target. Yesterday’s CPI reading was also in excess of this level and suggests that Carney and other members of the MPC could face some tough decisions in the not too distant future. The rate-setting panel’s swift and firm response to the shock outcome of last summer’s referendum has contributed to the rate of UK economic activity remaining similar to pre-Brexit levels, but they have also cultivated an environment of rising prices. Despite the recent triggering of Article 50, concrete details on what the terms outside the EU will be for UK businesses remain few and far between and the central bank will be reluctant to tighten monetary policy at a time when the economy could need additional accommodation. However if the rise in inflation gathers momentum and we start to see data closer to the 3% level then there could be little choice for Carney and co but to move away from the current unprecedented levels of monetary accommodation.
Pearson (LON:PSON) leads the charge
The best performing stock on the FTSE 100 today is Pearson PLC (LON:PSON), with the publisher rising more than 6% since the open. The share price has been hammered in recent sessions and has declined by more than 20% in the past 3 months, but investors will hope that today’s move may offer some light at the end of the tunnel. Old Mutual PLC (LON:OML) is another firm looking to recoup recent losses and the financial company is hoping that the recent political instability in South Africa has subsided for now with the stock up by approximately 3%. Financials in general are on the rise with HSBC Holdings PLC (LON:HSBA) and Lloyds Banking Group (LON:LLOY) both sitting on sizeable gains at the time of writing.EasyJet PLC (LON:EZJ) is adding to yesterday’s gains and is higher by 4.6% as the airline has risen above the 1000p level to trade at its highest price in 2017 this morning.
Tesco (LON:TSCO) falls on earnings release
The breadth of the move higher amongst blue-chip stocks is impressive with only a handful in the red at the time of writing. The biggest loser by a distance is Tesco with the supermarket seeing a decline of almost 4% despite reporting a 4.3% increase in group sales to £49.9bn. The results overall seem fairly solid with this being the first reported full-year growth since 2010 but the stock price has fallen. There has been a recent run up going into the release and it seems likely either that this is a case of elevated expectations weighing on price immediately after arguably good news or simply investors using the opportunity to take some money off the table.