The FTSE 100 (^FTSE) touched all-time highs and European indices gained on Tuesday morning as traders price in a higher likelihood of an interest rate cut by the Bank of England amid soft UK jobs data.
The unemployment rate rose to its highest point in five years, hitting 5.2%, while wage growth — a key metric watched by bank rate setters — softened.
“The Bank of England’s preferred measure of private sector pay growth has fallen to 3.4%, broadly in line with expectations, while broader measures that include bonuses have slowed even more sharply. Wage growth is now much closer to rates consistent with the 2% inflation target than it was a year ago,” said Jake Finney, senior economist at PwC UK.
“With slack building in the labour market and inflation moving in the right direction, the case for further rate cuts is strengthening. A move as early as March cannot be ruled out.”
Last week, data also showed economic growth was just 0.1% in the fourth quarter of 2025, another key data point for Threadneedle Street decision makers.
While the data sent the pound lower, equities markets were in the green.
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London’s premier index was 0.4% higher after the opening bell. InterContinental Hotels Group (IHG.L) was among the top gainers following its latest quarterly results.
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The more domestically focused FTSE 250 (^FTMC) traded 0.1% higher.
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Over in Germany, the DAX (^GDAXI) was 0.1% lower, compounding yesterday’s losses. Those with eyes on the German market will be watching inflation data.
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France’s CAC 40 (^FCHI) gained 0.2%.
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The pan-European STOXX 600 (^STOXX) rose 0.1%.
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The pound fell 0.4% against the dollar (GBPUSD=X), trading below the $1.36 mark. The pound sold off sharply after jobs data.
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US stock futures fell as traders caught up following the Presents Day break.
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