LONDON MARKETS: FTSE 100 Ends Higher As Weak Wages Keep Pound Under Pressure

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Reckitt Benckiser warns of softer sales

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A continued pullback in the pound helped push U.K. stocks higher Wednesday, as lackluster figures on British wages may help shape the Bank of England's monetary policy.

The FTSE 100 index rose 0.4% to finish at 7,542.87, leaving it within striking distance of its record close achieved last week. The London benchmark on Tuesday shed 0.1% (http://www.marketwatch.com/story/ftse-100-tilts-lower-as-traders-brace-for-inflation-report-2017-10-17).

Labor report: A reading on the U.K. jobs market was in focus, given a persistent lack of growth in real wages that's been a concern for BOE policy makers, among others.

Adjusted for price inflation, wages fell by 0.4% excluding bonuses, and by 0.3% including bonuses, in the three months to August, the Office for National Statistics said. That marked the sixth straight fall in inflation-adjusted wages. (http://www.marketwatch.com/story/uk-real-wages-fall-for-6th-month-in-a-row-2017-10-18)

The U.K.'s unemployment rate met expectations by remaining at 4.3%, the lowest since 1975.

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Those figures followed Tuesday's data that showed consumer-price inflation climbed to 3% in September. That level is a full percentage point above the BOE's target, and the figures likely will add to policy makers' deliberations on whether to raise the bank's key interest rate from 0.25% at their Nov. 2 meeting.

What strategists are saying: "The Bank of England will be wary of the fragile state of the U.K. consumer as it mulls its next move on interest rates.

So the Bank of England is caught between a rock and a hard place. Markets have bought into the hawkish rhetoric emanating from the central bank of late, and are now pricing in a rate rise before the end of this year. The Bank of England does have form for disappointing spectators on this front, however, looking out beyond a potential rate hike in the next few months, the longer term picture is still one of low interest rates dominating the economic landscape for some time to come."

-- Laith Khalaf, senior analyst at Hargreaves Lansdown

"Low wages and high inflation mean we need our savings to work even harder in order to generate an inflation-beating return. Even if the Bank of England does decide to pull the trigger on a November rate rise, it's likely that the Old Lady of Threadneedle Street will only incrementally move rates up from 0.25% to 0.5%, which will be cold comfort to income-hungry savers."

-- Maike Currie, investment director for personal investing at Fidelity International

Pound slide: Even though a BOE rate hike would likely support a move higher for sterling, the pound on Wednesday recently traded at $1.3180, unable to hold a brief jump to $1.3210 after the jobs report.

While the pound's drop has fueled growth in price inflation, it has also helped boost shares of multinational companies that make most of their earnings in overseas markets.

Among these, shares of high-end apparel and accessories maker Burberry Group (BRBY.LN) rose 1.5%, security services company G4S PLC (GFS.LN) added 0.9%, and equipment rental company Ashtead Group PLC (AHT.LN) was up 1.4%.

Stock movers: Reckitt Benckiser Group PLC's shares (RB.LN) fell 2.5%. The consumer products company behind brands such as Airwick and Scholl cut its full-year guidance for comparable revenue (http://www.marketwatch.com/story/reckitt-benckiser-cuts-guidance-as-revenue-falls-2017-10-18), after reporting a 1% fall for the third quarter.

Rio Tinto PLC (RIO) (RIO) (RIO) closed down 3%. The mining heavyweight and two former top executives were sued by U.S. regulators (http://www.marketwatch.com/story/sec-sues-rio-tinto-2-former-execs-with-fraud-2017-10-18)on Tuesday over claims they misled investors about the value of Mozambique coal assets obtained in an acquisition that caused huge losses the company.

BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) shed 1.8% but had traded modestly higher after the mining and petroleum company backed its fiscal 2018 guidance. (http://www.marketwatch.com/story/bhp-billiton-backs-guidance-for-fiscal-2018-2017-10-18)

Off the FTSE 100, shares of Flybe Group PLC (FLYB.LN) dropped 20% after the airline said higher-than-expected maintenance costs will pressure its half-year adjusted pretax profit.

(END) Dow Jones Newswires

October 18, 2017 12:30 ET (16:30 GMT)