The FTSE 100 is facing renewed pressure as fresh UK labour market data dampens expectations of an interest rate cut from the Bank of England in February.
While unemployment remains unchanged, stubbornly high wage growth is forcing investors to rethink how quickly borrowing costs might fall.
At the same time, global market nerves, rising gold prices, and political uncertainty abroad are adding to the cautious mood across London’s financial markets.
Why is the FTSE 100 under pressure today?
The FTSE 100 index slipped back after investors reacted to a mix of weak hiring data and stronger-than-expected wage growth.
Although parts of the market found support from so-called “defensive stocks” such as tobacco and telecoms, overall sentiment remains fragile.
Higher interest rates for longer tend to weigh on shares, particularly those sensitive to borrowing costs.
London’s top index is also tracking losses across Europe, where markets fell sharply following renewed concerns over global trade tensions.
Key FTSE 100 drivers today include:
- Reduced hopes of a near-term Bank of England rate cut
- Ongoing weakness in UK hiring
- Broader European market declines
- A global shift towards safe-haven assets like gold
What do the latest UK unemployment figures show?
According to the Office for National Statistics (ONS), the UK unemployment rate remained steady at 5.1% in the three months to November.
However, the headline number hides a weakening jobs market underneath.
The ONS reported:
- 184,000 fewer payrolled employees compared with a year earlier
- A monthly fall of 43,000 jobs in December
- Total UK payrolled employment is now at 30.2 million
Liz McKeown, Director of Economic Statistics at the ONS, said: “The number of employees on payroll has fallen again, with reductions over the last year concentrated in retail and hospitality, and reflecting ongoing weak hiring activity.”
Retailers, pubs, hotels, and restaurants are bearing the brunt as businesses hold back on recruitment amid rising costs and uncertain demand.
Why is wage growth worrying the Bank of England?
While fewer people are in work, those who are employed are still seeing relatively strong pay rises. This is a key concern for the Bank of England, as higher wages can keep inflation elevated.
Latest UK wage growth figures
Average earnings including bonuses:
- 4.7% (three months to November)
- Down only slightly from 4.8% in October
Private sector regular pay growth:
- Slowed from 3.9% to 3.6%
Public sector pay growth:
- Remains high due to delayed pay awards
- Annual growth in regular earnings (excluding bonuses) eased to 4.5%, down marginally from 4.6%.
Will the Bank of England cut interest rates in February?
Economists are increasingly doubtful. Consultancy Capital Economics said the resilience in pay growth reduces the likelihood of a rate cut at the next Monetary Policy Committee meeting.
Capital Economics said: “While the labour market remains soft, the stability of overall pay growth in November diminishes the chances that the Bank of England will cut interest rates from 3.75% to 3.5% at the next policy meeting in February.”
That said, economists stress that the decision is not final. Much now depends on the December CPI inflation figures, due shortly. A sharper-than-expected fall in inflation could still open the door to looser policy.
How are global markets and commodities affecting the FTSE 100?
European markets are firmly in the red, adding pressure to UK stocks.
On the continent:
- France’s CAC 40 fell 1.8%
- Germany’s DAX 40 dropped 1.3%
Meanwhile, US markets were closed for Martin Luther King Jr Day, but futures trading suggests modest losses when Wall Street reopens.
Gold and oil prices
- Gold surged above $4,700 an ounce for the first time
- Brent crude oil held steady near $64 a barrel
Rising gold prices point to investor unease and a shift towards safer assets during uncertain economic conditions.
Which FTSE 100 stocks are moving the most?
Despite the gloomy backdrop, individual stocks saw sharp moves.
- Beazley jumped 43% after Zurich Insurance announced a £7.7 billion takeover bid
- British American Tobacco and Vodafone provided modest support as defensive plays
These isolated gains, however, were not enough to lift the wider FTSE 100, which is still expected to open around 0.5% lower.
