UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Pound falls below $1.22 after employment report

Blue-chip stocks in the U.K. edged higher Wednesday, aided by advances for commodity shares, but the market's benchmark trimmed gains after data showed a slowdown in British wage growth.

The FTSE 100 rose 0.2% to 7,370.13, led by gains for mining, oil and gas and industrial shares. The index on Tuesday shed 0.1% (http://www.marketwatch.com/story/ftse-100-on-the-rise-as-pound-drops-to-lowest-since-january-2017-03-14), marking the first fall in three sessions.

Pay pall: But the index's rise was slightly clipped after data from the Office for National Statistics showed rising inflation is chipping into real wage growth for Britons (http://www.marketwatch.com/story/uk-unemployment-hits-4-decade-low-2017-03-15). Regular wages grew by 0.8%, adjusted for inflation, in the three months through January. That's the slowest rate of growth since late 2014.

The unemployment rate, meanwhile, fell to 4.7%, the lowest rate since 1975. The figures arrived before Thursday's Bank of England policy meeting.

"There are clear signs, then, that households are beginning to suffer from a real income squeeze. Because household spending makes up around two-thirds of U.K. demand, this is the main reason why we see the economy slowing down over the course of this year," said Chris Hare, economist at Investec, in a note.

Slowing wage growth isn't a positive development for the housing market, and shares of home builders struggled after the data.

Shares of home builders traded at the bottom of the FTSE 100. Home builder Persimmon PLC (PSN.LN) and Taylor Wimpey PLC (TW.LN) fell 2.1% and 1.6%, respectively, while Barratt Developments PLC (BDEV.LN) gave up 1.2%.

"Because of the soft wage picture, and the prospect of a real income squeeze driving an economic slowdown, the Monetary Policy Committee will be keen to stand pat on monetary policy for the time being."

Read: Ginflation? Brits drink so much gin it's now used to calculate inflation (http://www.marketwatch.com/story/ginflation-brits-drink-so-much-gin-its-now-used-to-calculate-inflation-2017-03-14)

Resource stocks: Miners got a lift as the dollar edged down, aiding a rise in dollar-denominated metals prices including copper and platinum . Near the top of the FTSE 100, shares of Rio Tinto PLC (RIO) (RIO) (RIO) rose 2.3%, Glencore PLC (GLEN.LN) (GLEN.LN) moved up 1.9% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) tacked on 1.4%.

The dollar shifted slightly lower ahead of the closely watched Federal Reserve policy decision, due at 6 p.m. London time, or 2 p.m. Eastern Time. Investors have priced in expectations of a rate hike, but will watch to see what Fed Chairwoman Janet Yellen will say about rates moving forward and her assessment of U.S. and global growth conditions.

Meanwhile, oil shares moved higher after being knocked down on Tuesday during a selloff in oil prices. Shares of oil producer BP PLC (BP.LN) (BP.LN) rose 0.9% and rival Royal Dutch Shell PLC (RDSB.LN)(RDSB.LN) picked up 0.8%.

Oil prices pushed higher Wednesday after industry group American Petroleum Institute late Tuesday reported a decline in U.S. crude supplies (http://www.marketwatch.com/story/api-data-show-an-unexpected-decline-in-us-crude-supplies-sources-2017-03-14). Oil prices stumbled earlier on Tuesday after a monthly OPEC report showed an increase in U.S. and Saudi Arabian crude output (http://www.marketwatch.com/story/oil-prices-rise-for-the-first-time-in-7-sessions-monthly-opec-report-ahead-2017-03-14) in an already oversupplied global market

The oil and gas and basic materials groups make up more than 20% of the FTSE 100's weighting, according to FactSet data.

In other moves, Hikma Pharmaceuticals PLC (HIK.LN) jumped 7% after the company raised its dividend (http://www.marketwatch.com/story/hikma-pharma-profit-drops-39-dividend-raised-2017-03-15). Profit in 2016 fell 39% after booking exceptional costs.

Sterling: The pound fell to $1.2188 after the U.K. labor-market report. It had traded above $1.22 before the data after a YouGov survey of showed 57% of respondents favored Scotland staying in the U.K. compared with 43% who back independence, according to The Times newspaper. (http://www.thetimes.co.uk/article/scots-want-to-remain-in-uk-new-poll-reveals-57256ptzs)

(http://www.thetimes.co.uk/article/scots-want-to-remain-in-uk-new-poll-reveals-57256ptzs)Scotland's First Minister Nicola Sturgeon said she'll ask the Scottish parliament next week (http://www.marketwatch.com/story/scottish-first-minister-nicola-sturgeon-confirms-plans-for-independence-vote-2017-03-13) for approval to hold a second referendum asking if Scotland should break away from the U.K.

(http://www.thetimes.co.uk/article/scots-want-to-remain-in-uk-new-poll-reveals-57256ptzs)Sterling bought $1.2154 late Tuesday in New York.

Read:What's going on in Scotland, and what that means for the pound (http://www.marketwatch.com/story/pound-pushed-lower-as-scottish-referendum-worries-emerge-2017-02-27)

Also:Opinion: Get ready for sterling's wild ride as the U.K. bolts the EU (http://www.marketwatch.com/story/get-ready-for-sterlings-wild-ride-as-the-uk-bolts-the-eu-2017-03-15)

(END) Dow Jones Newswires

March 15, 2017 07:54 ET (11:54 GMT)

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