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FTSE rises after UK jobs data as US stocks rebound

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·Business Reporter, Yahoo Finance UK
·3-min read
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The FTSE 100 closed in the green, while Wall Street stocks reversed earlier losses as retail sales surged. Photo: Michael Nagle/Xinhua via Getty
The FTSE 100 closed in the green, while Wall Street stocks reversed earlier losses as retail sales surged. Photo: Michael Nagle/Xinhua via Getty

The FTSE (^FTSE) was in positive territory on Tuesday as investors digested the latest jobs data from the Office for National Statistics (ONS) and the squeeze on the cost of living as Wall Street rebounded.

London's benchmark index closed 0.7% higher, with miners on the front foot and despite a firmer pound, while the CAC (^FCHI) climbed 1% on the day, and the DAX (^GDAXI) rose 1.3%.

Across the pond, the S&P 500 (^GSPC) advanced 1.4% and the tech-heavy Nasdaq (^IXIC) gained 1.7%. The Dow Jones (^DJI) edged 0.8% higher at London's close.

It came as the unemployment rate dropped to 3.7% in the first three months of the year, falling below economists’ forecasts to its lowest level since 1974.

However, UK wages continued to fall further behind the rate of inflation in March, adding more pressure to the sharp cost of living squeeze on households.

According to the ONS, average earnings excluding bonuses fell by 1.9% compared to a year earlier, the biggest decline since 2013.

Although wages excluding bonuses jumped 4.2% in the first quarter, double the 2.1% average in the decade before the pandemic, it was being offset by runaway inflation, which hit 7% in the year to March.

Read more: UK wages fall sharply despite record low unemployment rate

“The broad picture for the UK economy remains mixed, with falling wages offset by a further reduction in unemployment, with the latest update expected on inflation tomorrow. In the meantime, currency investors have been seeking havens such as the dollar in the face of the global challenges, which has been to the detriment of the pound,” said Richard Hunter, head of markets at Interactive Investor.

“More positively, the weakness of sterling against a rampant US dollar has underpinned gains for the FTSE100, which draws much of its earnings power from overseas and the US in particular.

“The premier index remains ahead by 1.3% in the year to date, helped by its exposure to an oil price which is ahead by 47% in 2022 and any number of resilient defensive plays. As such, the index has remained a rare investment destination of choice for investors amid the current maelstrom.”

Wall Street stocks reversed earlier losses as US retail sales rose 0.9% last month, according to new data from the commerce department. This was down from 1.4% in March, but broadly in line with estimates.

The increase rise was mainly driven by strong car sales as supply issues eased, while Americans kept heading to bars and restaurants.

Meanwhile, US factory production rose at a solid pace in April for the third straight month. The 0.8% increase followed a similar gain in March, according to Federal Reserve data. Total industrial production, which also includes mining and utility output, climbed 1.1%.

US markets had a mixed session on Monday, with another significant decline in the Nasdaq, while the Dow finished slightly higher.

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Michael Hewson of CMC Markets said: “Investor concerns about a possible recession are contributing to a short-term bid in US treasuries, pulling yields down in the process, as well as a reluctance to build on the rebound seen at the end of last week.”

Stocks in Asia finished higher on Tuesday despite Wall Street closing mostly down on weak Chinese economic data. Traders were feeling optimistic over the easing of some COVID restrictions in Hong Kong and Shanghai.

The Hang Seng (^HSI) soared 3.1% on the day in Hong Kong, while the Shanghai Composite (000001.SS) advanced 0.7%, and the Nikkei (^N225) was 0.4% up in Tokyo.

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