Miners drag FTSE lower despite Turkish fears receding

Despite opening in the black as the Turkish Lira rebounded and fears of contagion receded, the FTSE steadily moved lower across the session, dragged down by the miners; not even a weakening pound was sufficient to lift the index.

UK Unemployment at 40 Year Low
The pound spiked higher in early trade as traders digested labour market data, hitting a high of $1.2830 before dropping back to trade lower on the day. The UK unemployment rate plummeted to its lowest level in 40 years at 4%. This was below the 4.2% that was forecast. Yet the falling unemployment level plus the biggest annual decline in workers from the EU since records began was unable to produce a lift in wage growth that would be expected from such statistics. 

Whilst the UK’s labour market’s ability to generate jobs was one of the factors which led the BoE to hike interest rates earlier this month, the tighter labour market is still not translating into higher earnings which runs counter to the BoE’s expectations. Average weekly earnings grew 2.4% year on year in the three months to June, lower than the 2.5% forecast and slipping from 2.5% in May.  Furthermore, this slacking in wage growth could be an indication that the economy will lose some of the momentum that it picked up in Q2. The pound spiked higher on the headline grabbing unemployment numbers, however, the wage data brought the pound back to reality and is looking to end the European session 0.1% lower versus the dollar.

Traders will now look ahead to tomorrows inflation numbers. CPI is expected to show inflation ticked higher on an annualised basis in July, to 2.5%, from 2.4% the month previous. Core inflation is expected to remain constant at 1.9%. This implies that the move higher in inflation is mainly down to oil price movements, something that the BoE tends to look past.

Antofagasta Dives on Trade Tension Warning
Leading the charge southwards, Antofagasta dived over 6.8% as the copper miner gave a warning on the impact of trade tensions when it released its results earlier this morning. Despite Antofagasta saying the outlook was strong a strong, traders focused on the warning that tariff threats are “creating considerable market uncertainty” and a 16% fall in first half earnings; not so surprising given that copper prices have tumbled 17% on the back on the US – Sino trade spat, after hitting a three-year high. Whilst increased trade tensions haven’t actually impacted on the physical demand for copper, it has made traders nervous and that is enough to send prices lower.

Royal Mail Drops on Fine
Royal Mail, another standout decliner on the FTSE after the UK communications regulator fined Royal Mail £50 million for breaking competition law. This won’t be the end of the matter, Royal Mail have already confirmed that they will appeal, however should the decision be upheld, this would be a significant sized fine, one which we expect would have a sizeable impact on earnings. Even if the decision doesn’t get upheld, the appeal process itself is a distraction for Royal Mail, dragging attention away from its attempts to launch the business forward.