Spiking yields and worrying wage data knock FTSE

The FTSE 100 and 'mid-cap' FTSE 250 index fell this morning as UK jobs data shows inflation is outpacing wages.

Sharply rising bond yields in the US knocked UK equity markets this morning, with the latest jobs data adding to investor concerns as wage growth fails to keep pace with runaway inflation. 

After hitting its highest level in almost two years yesterday, the FTSE 100 slid 0.8%, or 58 points, to 7,552, while the FTSE 250 shed 1%, or 232 points, to trade at 22,639.

British stocks took their lead from the US, where government bonds sold off and yields rose sharply in thin holiday trading yesterday. That means the opening on Wall Street will be closely watched today, with highly-valued tech stocks likely to come under pressure as yields rise. 

Adding to investor concerns was the latest jobs data from the Office for National Statistics (ONS).

The ONS figures showed unemployment was at 4.1% in the three months to end of November, just 0.1% above pre-pandemic levels, but the numbers that captured the market’s attention were around wage growth. Regular wage growth fell 1% in real terms in November as soaring inflation – currently running at 5.1% – ate into pay packets.

‘Inflation has waged war on pay and in November salaries actually slid once inflation was taken into account,’ said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

‘This has piled on the pressure for those struggling through the cost-of-living crisis, and things are going to get even worse.’

Danni Hewson, a financial analyst at AJ Bell, questioned how the fall in real wages would impact the Bank of England’s thinking.

‘Spiralling wage growth and a booming jobs market played into its decision making to increase rates in December,’ she said.

‘Do they look at today’s figures and decide their plans need to speed up in order to help average workers feeling the pain, or do they consider that wage growth, even if you exclude inflation, is slowing and new vacancies are slowing too?’

Precious metals miner Polymetal International (POLY) led FTSE 100 stocks lower, down 3.1%, or 36p, at £11.18. It was followed by Rightmove (RMV), which shed 3.1% to trade at 668p, and engineering software group Aveva (AVV), which lost 3% to change hands at £28.62.

Among ‘mid caps’, online review platform Trustpilot (TRST) was the biggest faller, down 4.7%, or 11p, at 231p. It was followed by miner Ferrexpo (FXPO), which lost 4.4% to trade at 254p, while Games Workshop (GAW) continued to disappoint, falling 4% to £80.45 after Jefferies analysts cut its target price to £111.75 from £122.50.

 Anticipating falls for US technology stocks, FTSE 100 investment trust Scottish Mortgage (SMT ) shed 2.6% to hit £35.63, with other tech-oriented portfolios also taking a hit. Edinburgh Worldwide (EWI ) was down 3.7% at 232p, Allianz Technology (ATT ) slid 3.6% to 290p, and Monks (MNKS ) lost 3.2% to trade at £11.80.

LXI Reit (LXI ) was another notable faller, slipping 4.3% to 145p after proposing an equity raise of £125m. It is targeting an issue of 88.26m new shares at 142p each, a 2.9% premium to estimated net asset value at the end of 2021. However, the figure is a 6.8% discount to yesterday’s closing share price.

The specialist long-lease property investor said it had identified a £272m acquisition pipeline of both built assets and forward-funded projects.

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