London stocks were down by the close on Wednesday as the recent gains in the pound's evaporated on the back of wage data that remained stagnant in spite of seemingly good news from a fall in the unemployment rate.
The FTSE 100 was down 0.28% to 7,379.70 as the pound gained 0.1% against the euro to 1.1113, easing back from a six-week high, and fell 0.51% versus the dollar
at 1.3216%, down from its one-year high or 1.3315.
Over in Europe, markets looked a bit more upbeat with the DAX up 0.23% to 12,553.57, the CAC 40 0.16% higher to 5,217.59 and the IBEX 35 also in the red at 10,390.90.
The pound had shot higher the previous day after data showed inflation spiking to a six-year high in August, raising expectations that the Bank of England will lift rates sooner rather than later. However, disappointing wage data released earlier prompted doubts about a rate hike.
Neil Wilson, senior market analyst at ETX Capital, said: "So is that no hike this year? Sterling gave up the $1.33 handle to trade at $1.3270 after some weaker-than-expected wage growth added to fears about an income squeeze following yesterday's inflation rise. High inflation, low wage growth - this is the conundrum for the Bank of England. At present it doesn't look supportive of a hike, but markets need to be ready for a hawkish hold."
Figures from the Office for National Statistics showed UK earnings growth continues to lag well below inflation despite the unemployment rate falling to a new record low.
Average weekly earnings growth remained at 2.1% for the three months to the end of July, falling short of the expected 2.2%. For the single month of July, earnings growth dropped to just 1.4% from 2.8%.
Excluding bonuses, average earnings were also up 2.1% compared to the same period last year versus the 2.2% consensus forecast.
This disappointing wage data came despite the UK ILO unemployment rate falling to 4.3% from 4.4%, where it had been forecast to stay and which is further below the Bank of England's estimate of the equilibrium rate.
There was an 181,000 improvement in employment in the three months to July compared to the three months to April.
In more timely data, jobless claims fell 2.8K in August, which was more than expected, with a claimant count rate of 2.3% last month, the same as in July.
On the corporate front, housebuilder Galliford Try led the fallers despite reporting full-year pre-tax profit at the top end of its expected range.
Tesco was hit by a downgrade to 'underperform' at Exane BNP Paribas, ITV was lower after being cut to 'underperform' at Macquarie, and Esure was under the cosh after UBS downgraded the stock to 'sell' from 'neutral'.
Infrastructure and construction company Balfour Beatty was slightly higher after selling Blackpool Airport for £4.25m, while Just Group edged lower despite reporting 39% growth in its adjusted operating profit for the first half.
Halfords was in the black after it poached fellow retailer Dixons Carphone's software boss, Graham Stapleton, to take up the chief executive role vacated by the soon-to-depart Jill McDonald.
Dunelm rallied as it said the new financial year had started well, even though full-year profits dropped to towards the lower end of expectations.
Budget airline EasyJet flew higher after it announced it will now let customers book long-haul flights with other carriers through its website.
FTSE 100 (UKX) 7,379.70 -0.28%
FTSE 250 (MCX) 19,589.97 -0.39%
techMARK (TASX) 3,458.93 -0.29%
FTSE 100 - Risers
Provident Financial (PFG) 846.00p 1.68%
Micro Focus International (MCRO) 2,428.00p 1.25%
Barratt Developments (BDEV) 603.00p 1.17%
Experian (EXPN) 1,533.00p 0.79%
Royal Dutch Shell 'A' (RDSA) 2,152.00p 0.77%
BP (BP.) 452.35p 0.77%
Convatec Group (CTEC) 269.40p 0.67%
easyJet (EZJ) 1,202.00p 0.67%
Royal Dutch Shell 'B' (RDSB) 2,192.00p 0.64%
BT Group (BT.A) 285.05p 0.64%
FTSE 100 - Fallers
Antofagasta (ANTO) 969.00p -3.87%
Fresnillo (FRES) 1,513.00p -3.63%
Anglo American (AAL) 1,349.00p -3.19%
Johnson Matthey (JMAT) 2,833.00p -2.58%
Glencore (GLEN) 363.60p -2.39%
Croda International (CRDA) 3,777.00p -2.15%
BHP Billiton (BLT) 1,408.50p -2.05%
Mediclinic International (MDC) 734.50p -1.87%
Tesco (TSCO) 181.65p -1.84%
Rio Tinto (RIO) 3,624.50p -1.79%
FTSE 250 - Risers
Dunelm Group (DNLM) 661.50p 8.35%
IP Group (IPO) 124.90p 4.17%
TBC Bank Group (TBCG) 1,636.00p 3.34%
Euromoney Institutional Investor (ERM) 1,157.00p 2.82%
Go-Ahead Group (GOG) 1,585.00p 2.59%
Entertainment One Limited (ETO) 254.10p 2.54%
Vectura Group (VEC) 102.50p 2.19%
Cairn Energy (CNE) 181.00p 2.14%
Clarkson (CKN) 2,784.00p 1.90%
Sophos Group (SOPH) 575.00p 1.77%
FTSE 250 - Fallers
Kaz Minerals (KAZ) 768.50p -5.76%
Hochschild Mining (HOC) 259.20p -4.57%
Travis Perkins (TPK) 1,421.00p -3.86%
Dechra Pharmaceuticals (DPH) 2,048.00p -3.76%
Millennium & Copthorne Hotels (MLC) 437.50p -3.63%
Greencore Group (GNC) 197.00p -3.48%
Vedanta Resources (VED) 832.50p -3.37%
Fisher (James) & Sons (FSJ) 1,504.00p -3.10%
Centamin (DI) (CEY) 148.20p -3.07%
esure Group (ESUR) 256.10p -3.03%