London stocks up as labour market data shows signs of cooling

British equities opened on a positive note on Tuesday as investors cheered further signs of a cooling labour market in the UK. The benchmark FTSE 100 index gained 0.3% by 7:07 GMT, while the mid-cap FTSE 250 was also up 0.3%.

The pound slipped against the US dollar and was last at $1.2719. The unemployment rate in Britain for April rose to 4.4% from 4.3%.

A Reuters poll had pointed to an unchanged unemployment rate. British wages excluding bonuses - which are being watched by the Bank of England (BoE) as it considers when to cut interest rates - grew by 6% in April.

Economists polled by Reuters had forecast wage growth of 6.1%. Traders are now expecting nearly a 60% chance of a September rate cut by the BoE. The central bank meets in less than two weeks from now to take a call on borrowing costs.

Among individual stocks, Rio Tinto lost 1.9% and was the top loser on the FTSE 100 as the mining giant said it will buy Mitsubishi Corp’s 11.65% stake in Boyne Smelters (BSL) for an undisclosed sum.

Anglo American fell 1.4% after Morgan Stanley resumed coverage on the stock with an “equal-weight” rating. Bucking the trend, Oxford Instruments surged 8.1% after the nanotechnology tools maker reported its full-year results above estimates.

European equities and the euro extended a sell-off Tuesday, fuelled by EU political uncertainty, while Asian markets also took a hit as investors looked ahead to inflation data and an interest rate decision in the United States.

Investors were “carefully assessing the impact of rightwing parties’ success in the European Union and its potential effects on the bloc’s unity”, said Tickmill Group analyst Patrick Munnelly.

Far-right parties performed well in weekend EU Parliament elections, prompting French President Emmanuel Macron to call a snap parliamentary vote and sparking political turmoil in his country.

Ratings agency Moody’s has warned that Macron’s move could lower France’s credit score because it raises the risk of “political instability”.

Traders were looking ahead to US inflation data and the outcome of the Federal Reserve’s latest monetary policy meeting, both due Wednesday. While decision-makers are expected to keep borrowing costs on hold, the inflation numbers could provide clues on when the Fed could start cutting rates.

Wall Street pushed higher Monday, with the S&P 500 and Nasdaq once again chalking up record highs.

But Asian investors were less assured Tuesday, after a tepid start to the week in holiday-thinned trade.

Speculation has been swirling about how many, if any, interest rate cuts the Fed will introduce this year, with several officials warning they are reluctant to move too soon for fear of restoking inflation, which remains stubbornly above its target of two percent.

Traders started the year predicting as many as six cuts but have whittled them down since then, and now the most optimistic estimate is for three, with some even eyeing zero.

Elsewhere Tuesday, oil prices fell as traders awaited demand forecasts from OPEC.

By 7:07 GMT, the blue-chip FTSE 100 was down 0.6% at a near two-week low, while the mid-cap FTSE 250 fell 0.4% to 20,467.8 points.

Both the indexes were poised to log a second straight session of losses. Investors are bracing for a slew of domestic economic data, including wages and GDP data, set to be released this week.

Analysts, meanwhile, expect the Bank of England to move independently from the Federal Reserve and cut rates, but still moniter data closely.

The British central bank meets in less than two weeks to take a call on borrowing costs. Among broader markets, a snap legislative election called by French President Emmanuel Macron weighed on overall sentiment in Europe. Back in Britain, all FTSE 350 sectors were in the red on the day. Among individual stocks, Aviva Plc lost 2.1% after JP Morgan downgraded its rating on the stock to “neutral” from “overweight” and removed it from its analyst focus list.