London close: Stocks higher after softer UK employment data

London stocks closed higher on Tuesday, as investors assessed the latest UK employment data, and watched for developments across the pond on the first full day of Donald Trump’s second presidential term.

The FTSE 100 index rose 0.33% to finish at 8,548.29 points, while the FTSE 250 gained 0.53% to end at 20,595.73 points.

In currency markets, sterling was last up 0.05% on the dollar to trade at $1.2334, while it slipped 0.05% against the euro, changing hands at €1.1828.

“Asian and European stock indices showed a mixed reaction the day after President Trump's inauguration, but the FTSE 100 and DAX 40 stayed close to their record highs despite tariff uncertainty, UK and German data,” said IG senior technical analyst Axel Rudolph.

“Passenger car registrations in the European Union grew to a six-month high and German investor morale fell more than expected while UK pay growth accelerated the most in six months with unemployment edging up to 4.4%, while payrolls plunged the most since 2020.”

Rudolph noted that Trump's executive orders and possible 25% US tariffs on imports from Mexico and Canada as soon as 1 February provoked a sharp sell-off in the Mexican peso towards a more-than-three-year low.

“US stocks rose while Treasury yields slid further and the Us dollar gave back most of its overnight gains.

“After-hours Netflix fourth-quarter earnings will provide the next focal point for investors.”

UK labour market data softens, Treasury reportedly intervenes in car finance case

In economic news, the UK labour market showed signs of softening as unemployment edged up and vacancies continued to shrink in the autumn, according to fresh data from the Office for National Statistics (ONS).

Between October and November, payrolled employees declined by 0.1%, or 32,000, with an early estimate for December suggesting a further fall of 47,000.

The unemployment rate for September to November stood at 4.4%, in line with forecasts, while vacancies fell by 24,000 to 812,000 in the three months to December.

Despite the challenges, wage growth accelerated, with average annual growth for both regular and total pay rising to 5.6% in the three months to November, surpassing economists’ expectations of 5.5%.

In real terms, that translated to a 2.5% rise for regular pay, reflecting ongoing concerns for the Bank of England as it navigates inflationary pressures.

“Today’s data epitomises the bind the MPC finds itself in,” said Mat Swannell, chief economic adviser to the EY Item Club.

“Though pay growth remains resilient and well above target-consistent pace, the jobs outlook is clearly weakening.

“The minutes of December’s meeting suggested that the MPC is starting to place more emphasis on concerns about soft output and employment growth, so it’s reasonable to expect it will lower Bank Rate by 25 basis points in February and stick to its cut-hold tempo through the rest of 2025.”

The car finance sector was meanwhile in focus, following reports of government intervention in a legal battle threatening the industry.

According to the Financial Times, the Treasury warned the Supreme Court that a mis-selling case involving car finance could lead to significant economic disruption.

The case centres on allegations that commissions paid to car dealers without customers' informed consent were unlawful.

Analysts estimated potential compensation costs between £20bn and £44bn.

The Treasury had reportedly argued for proportionate remedies, warning against regulatory uncertainty and excessive penalties that could harm both consumers and the industry.

On the continent, new car sales rose 5.1% year-on-year in December, driven by a 28.8% surge in registrations in Spain, according to the European Automobile Manufacturers Association.

However, sales declined in Germany and Italy, down 7.1% and 4.9% respectively.

For 2024 as a whole, EU car sales edged up 0.8%, with Spain again leading the way with a 7.1% increase.

The market saw shifts in vehicle preferences, as hybrid electric vehicles gained a larger share at 30.9%, while battery electric vehicle sales slipped slightly to 13.6%.

In Germany, investor sentiment fell sharply in January, according to the ZEW Institute.

Its economic sentiment index dropped to 10.3 from 15.7 in December, missing forecasts of 15.4, as concerns over the economic outlook deepened following two years of recession.

Overnight in the US, newly-inaugurated president Donald Trump announced plans to impose 25% tariffs on imports from Mexico starting 1 February.

Speaking from the Oval Office, Trump confirmed he was not yet ready to pursue a universal tariff on all imports - a measure he had suggested during his campaign.

Car financiers in the green, Marshalls slides on revenue decline

On London’s equity markets, financial stocks exposed to the car finance mis-selling case were in focus, with Lloyds Banking Group climbing 3.99% and Close Brothers Group surging 21.57%.

The moves came on the back of the reports that Chancellor Rachel Reeves had taken steps to shield car-loan providers from potential multi billion-pound payouts linked to a landmark mis-selling case.

Elsewhere, Abrdn advanced 4.45% after reporting a return to net inflows in the fourth quarter, signalling a positive turnaround for the investment firm.

Specialty chemicals company Elementis gained 6.27% after announcing that full-year operating profit is expected to exceed market expectations, driven by a robust fourth-quarter performance.

Promotional products firm 4imprint Group jumped 12.16% after reporting a strong full-year financial performance, while food producer Premier Foods also made gains, stating that its full-year trading profit would be at the upper end of its previous guidance.

Alpha Group International rose 7.98% after the financial solutions provider reported a 23% increase in full-year revenue, with growth accelerating from the first half.

Construction firm Kier Group gained 3.61% after announcing a £20m share buyback alongside an in-line first-half trading update.

On the downside, Marshalls fell 6.84% after reporting a drop in full-year revenues, despite confirming profitability within the market range and expressing caution over its outlook.

Defence technology firm QinetiQ dropped 7.94% following its latest trading update, which failed to meet investor expectations.

Property portal Rightmove declined 2.56% after being downgraded to ‘underperform’ by Jefferies, while mining giant Anglo American slipped 1.51% following a downgrade to ‘hold’ at SBG Securities.

Primark owner Associated British Foods shed 2.1% after Morgan Stanley lowered its rating to ‘underweight,’ citing concerns over future growth prospects.

Freight and road payments firm WAG Payment Solutions saw its shares drop 5.19% after announcing that chairman Paul Manduca would step down at the next annual general meeting.

The company still expressed confidence in meeting its 2024 financial targets, however.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,548.29 0.33%
FTSE 250 (MCX) 20,595.73 0.53%
techMARK (TASX) 4,694.76 0.10%

FTSE 100 - Risers

Lloyds Banking Group (LLOY) 61.00p 3.99%
Games Workshop Group (GAW) 13,980.00p 3.17%
Airtel Africa (AAF) 127.00p 2.58%
Ashtead Group (AHT) 5,466.00p 2.55%
AstraZeneca (AZN) 11,052.00p 2.39%
Smith (DS) (SMDS) 601.50p 2.21%
BAE Systems (BA.) 1,248.50p 1.96%
Smurfit Westrock (DI) (SWR) 4,495.00p 1.93%
St James's Place (STJ) 920.50p 1.88%
International Consolidated Airlines Group SA (CDI) (IAG) 328.50p 1.80%

FTSE 100 - Fallers

Pershing Square Holdings Ltd NPV (PSH) 4,182.00p -2.74%
Associated British Foods (ABF) 1,949.00p -2.65%
Rightmove (RMV) 647.40p -2.56%
Glencore (GLEN) 380.60p -1.70%
Haleon (HLN) 367.30p -1.63%
Sainsbury (J) (SBRY) 260.60p -1.59%
Anglo American (AAL) 2,581.00p -1.51%
Rio Tinto (RIO) 5,023.00p -1.34%
Mondi (MNDI) 1,210.50p -1.14%
Prudential (PRU) 655.00p -1.00%

FTSE 250 - Risers

4Imprint Group (FOUR) 5,580.00p 12.16%
Wizz Air Holdings (WIZZ) 1,433.00p 7.10%
Elementis (ELM) 156.00p 6.27%
Alpha Group International (ALPH) 2,380.00p 5.78%
Abrdn (ABDN) 147.90p 4.45%
Burberry Group (BRBY) 1,006.00p 4.44%
Oxford Nanopore Technologies (ONT) 153.30p 4.38%
Tritax Big Box Reit (BBOX) 142.50p 4.32%
Trainline (TRN) 392.00p 4.09%
Hochschild Mining (HOC) 229.00p 3.85%

FTSE 250 - Fallers

QinetiQ Group (QQ.) 387.20p -7.94%
Marshalls (MSLH) 236.50p -7.44%
W.A.G Payment Solutions (WPS) 80.40p -5.19%
Greggs (GRG) 2,094.00p -4.12%
Grainger (GRI) 209.00p -3.24%
Ferrexpo (FXPO) 106.20p -2.93%
PPHE Hotel Group Ltd (PPH) 1,275.00p -2.67%
Bodycote (BOY) 638.00p -2.45%
Harworth Group (HWG) 165.00p -2.37%
Mobico Group (MCG) 76.30p -2.25%