FTSE 100 slumps after UK wage growth data stokes fears over interest rates

UK stock markets slumped on Tuesday as worries about the Chinese economy weighed heavy and new wage UK data stoked fears over future interest rate rises. London’s FTSE 100 plunged by around 1.7% during the day, reaching lows of more than a month as all but a handful stocks on the blue-chip index saw losses. Miners and finance giants acted as the biggest drag on the index, which closed 117.51 points lower, or 1.57%, at 7,389.64. New official data showed that regular wages in the UK grew at the fastest rate since reliable records began, reaching 7.8% in the three months to June, compared to a year earlier. The British pound is starting to look attractive again as it seems the Bank will easily be raising rates at both the September and November meetings Edward Moya, senior market analyst for Oanda Even though regular wages, which takes into account the impact of inflation, stagnated, the data could still put pressure on the Bank of England’s policymakers who are looking for signs that inflationary pressures are easing. Edward Moya, senior market analyst for Oanda, said: ‘Record wage growth will keep the pressure on the Bank of England to deliver more tightening. The economy still has a tight labour market as companies need to pay their employees more money. ‘This hot wage data is giving the Bank hawks a win as they were right in calling for a half-point rate increase at the last meeting. ‘The British pound is starting to look attractive again as it seems the Bank will easily be raising rates at both the September and November meetings.’ The pound, meanwhile, saw a modest rebound and was up 0.4% against the US dollar to 1.2731. Sterling was also up 0.2% against the euro to 1.165. It was a disappointing session for other European stocks which notched up substantial losses on Tuesday. Germany’s Dax lost 0.86% and France’s Cac 40 was down 1.1% at close. Investors were also downbeat across the pond. The S&P 500 was down 0.7% and Dow Jones was down 0.75% by the time European markets closed. Fears over China were dampening global sentiment after weaker-than-expected economic data for the world’s second largest economy. The price of Brent crude oil slumped by 1.9% to 84.62 US dollars per barrel. In company news, shares in Marks & Spencer surged after the upmarket supermarket told investors it will deliver higher profits for the year. The high-street business said it has increased market share in both its clothing and homeware and food divisions in the past 19 months, and that it had sold more stock at full price. Investors were in good spirits after the update and its share price moved 8.2% higher. Shares in Legal & General slipped despite the insurer beating profit forecasts after being bolstered by a strong performance for its retirement division. But the group still reported a dip in earnings compared to the previous year. Its share price closed 3% lower. The biggest risers on the FTSE 100 were B&M European Value Retail, up 11.2p to 565.2p, JD Sports Fashion, up 2.95p to 149.4p, Frasers Group, up 6.5p to 811p, Ocado Group, up 3.2p to 799.4p, and Kingfisher, up 0.7p to 234.4p. The biggest fallers on the FTSE 100 were Phoenix Group Holdings, down 19.2p to 520.6p, HSBC, down 21.1p to 600.3p, Glencore, down 14.75p to 419.05p, Antofagasta, down 50.5p to 1,452.5p, and M&G, down 6.1p to 188.4p.