Strong jobs market print fails to dampen inflation fears on London markets

Inflation jitters spreading throughout the City led London markets sharply lower today.

The capital’s premier FTSE 100 dipped below the 7,600 mark by closing the day down 0.63 per cent, while the domestically-focused FTSE 250 fell 0.96 per cent to 22,652.71 points.

Figures released by the Office for National Statistics (ONS) today revealed the unemployment rate in the UK dropped back to 4.1 per cent, while payrolled employee levels climbed well above pre-pandemic levels.

Despite the improving jobs picture, investors are instead zeroing in on tomorrow’s inflation reading, which is expected to come in at the highest level in nearly 30 years, hitting 5.2 per cent.

The strong jobs print strengthened investors’ expectations that the Bank of England will hike interest rates, weighing on equity markets and pushing bond yields higher.

Higher bond yields tend to hit equity markets as it both improves the attractiveness of fixed income assets and hits valuations for megacap stocks.

Neil Wilson, chief market analyst at Markets.com, said: “UK employment data looked encouraging as employees on payroll hit a record high, but big decline in self-employment means total employment still way below pre-pandemic, whilst falling real wages in the face of inflation is a problem for growth.”

Consumer stocks led the FTSE 100 lower today, with Unilever and JDSports losing 3.97 per cent and 3.52 per cent respectively.

On the FTSE 250, Games Workshop was among the worst performers, dipping 4.11 per cent.

The pound lost ground on the greenback, weakending 0.5 per cent to buy $1.3578.