By Julien Ponthus and Kit Rees
LONDON (Reuters) - Britain's top share index fell on Wednesday as sterling was pushed to a post-Brexit-vote high by data showing that the number of people in work had surged unexpectedly.
The FTSE 100 (FTSE) ended the session down 1.1 percent at a three-week low of 7,643.43 points. The blue-chip index underperformed its continental European peers as the pound rose above $1.42, a level not seen since June 2016.
The UK jobs data boosted gilt yields, dimming the appeal of consumer staples stocks that are a favourite among income investors. Among those were BAT (L:BATS) and Reckitt Benckiser (L:RB), which contributed most to the FTSE's fall.
The slow recovery of sterling since the June 2016 Brexit vote has given an accounting boost to UK blue chips with revenue in dollars. A weak pound typically supports the FTSE while its rise usually drags on the index.
"It is becoming increasingly difficult for the Bank of England to justify its ultra-accommodative policy stance," said Kallum Pickering, a senior economist at Berenberg.
Given the buoyant employment data, Pickering expects two interest rates hikes in 2018, which could provide yet further support to the pound.
Miners were the only group to gain ground, with Fresnillo (L:FRES) up 3.7 percent after posting record annual silver production. Anglo American (L:AAL) and Randgold Resources (L:RRS) were up 0.8 percent and 3 percent respectively.
Chilean copper producer Antofagasta (L:ANTO), however, fell 0.8 percent after reporting a drop in fourth-quarter production and said it expected 2018 costs to be higher.
Software company Sage Group (L:SGE) was by far the worst performer, down 6.5 percent after its first-quarter results.
"Q1 is slightly disappointing, even allowing for usually slower growth rates at this juncture," Investec analysts said.
Shares in exchange operator LSE (L:LSE) led the 20 or so stocks in positive territory, rising 5 percent on the back of a media report saying that activist hedge fund TCI was predicting a 15 billion pound takeover bid for the company.
Outside of the blue chips, British pubs group JD Wetherspoon (L:JDW) issued upbeat guidance and strong comparable sales in the Christmas period, lifting its share price by 2.3 percent.
(Graphic for FTSE vs. Sterling, click http://reut.rs/2DvURse)