Admiral shares hit hard after earnings report
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U.K. stocks climbed Wednesday, with BHP Billiton PLC's gain helping to guide the market toward a third consecutive advance, while an update from the British labor market came in better than had been anticipated.
The FTSE 100 moved up 0.6% to 7,430.210. The index on Tuesday rose 0.4%, (http://www.marketwatch.com/story/uk-stocks-rise-for-2nd-straight-day-ahead-of-key-inflation-data-2017-08-15) aided by a slide in the pound after a weaker-than-expected reading on inflation.
Equities on Wednesday largely held gains as sterling bounced up to an intraday high above $1.29 after wage growth rose more than expected in June while the unemployment rate fell to 4.4% (http://www.marketwatch.com/story/uk-jobless-rate-hits-lowest-since-1975-2017-08-16), the lowest since 1975, but equities overall held their gains.
"For the average consumer, this is only good news as purchasing power takes a step in the right direction which with Brexit headwinds is a nice, albeit temporary, relief for U.K. economics," wrote Alex Lydall, head of dealing at Foenix Partners.
Among stock advancers, BHP Billiton (BLT.LN) (BHP.AU) (BHP.AU) was up 1.75 after activist investor Elliott Management Corp. said it has raised its holding in the mining heavyweight (http://www.marketwatch.com/story/elliott-management-increases-stake-in-bhp-billiton-2017-08-15) to 5% of BHP's London-listed shares. Elliott also signaled it backs the incoming chairman to act on sweeping changes it's been seeking.
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EasyJet PLC shares (EZJ.LN) were up 1.4%, extending gains from Tuesday following news that Air Berlin PLC filed for insolvency.
Air Berlin's "disappearance from the scene means that lots of valuable runway slots across Europe have suddenly become available and although the expectation is that Lufthansa will acquire many of them there was also talk that easyJet would be bidding for a share of them," wrote Bill McNamara, technical analyst at Charles Stanley.
But shares of Admiral Group PLC (ADM.LN) sank 5.6% as the insurer's first-half profit increased but did see an impact from the higher cost of personal injury claims.
"Most of the adverse impact from the increase in the costs of large injury claims, resulting from the change in the Ogden discount rate, was captured in our 2016 second half result. However, some extra costs carry into 2017," Admiral said in its earnings report.
Data: The Office for National Statistics said average weekly earnings rose 2.1%, both excluding and including bonuses. Analysts polled by FactSet had expected wage growth of 1.9% excluding bonuses, and of 1.8% including bonuses.
The pound jumped to an intraday high of $1.2903 from $1.2854 just before the June jobs report was released.
"Sterling rose this morning as the gap between wage increases and inflation narrowed for the second month in a row, easing pressure on consumers affected by rising prices since the [Brexit] referendum," said Jake Trask, FX research director at OFX.
"Those hoping for an interest rate hike from the Bank of England are likely to be waiting a while longer, however, as wage growth is still subdued compared to historical standards. Rates are likely to stay put for 2017, and possibly next year, too," he added.
The U.K.'s benchmark interest rate stands at a record low 0.25%.
Meanwhile, investors will be looking for signals that the Federal Reserve remains on course to raise interest rates again this year when minutes from that central bank's July meeting are released at 7 p.m. London time, or 2 p.m. Eastern time.
Sterling late Tuesday fetched $1.2869.
(END) Dow Jones Newswires
August 16, 2017 06:24 ET (10:24 GMT)