London stocks were down but off earlier lows by midday on Wednesday as the pound's gains 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 0.3% to 7,381.16 as the pound dropped 0.3% against the euro to 1.1072, easing back from a six-week high, and fell 0.2% versus the dollar
at 1.3259%, down from its one-year high.
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 flat after selling Blackpool Airport for £4.25m, while Just Group edged up as it reported 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) 7,387.77 -0.17%
FTSE 250 (MCX) 19,605.81 -0.31%
techMARK (TASX) 3,459.02 -0.29%
FTSE 100 - Risers
easyJet (EZJ) 1,216.00p 1.84%
Micro Focus International (MCRO) 2,431.00p 1.38%
Barclays (BARC) 193.30p 1.02%
International Consolidated Airlines Group SA (CDI) (IAG) 603.00p 0.75%
Experian (EXPN) 1,532.00p 0.72%
CRH (CRH) 2,673.00p 0.72%
Smurfit Kappa Group (SKG) 2,403.00p 0.71%
Royal Dutch Shell 'A' (RDSA) 2,149.50p 0.66%
BP (BP.) 451.75p 0.63%
Royal Dutch Shell 'B' (RDSB) 2,191.00p 0.60%
FTSE 100 - Fallers
Tesco (TSCO) 181.55p -1.89%
Whitbread (WTB) 3,694.00p -1.78%
Anglo American (AAL) 1,370.00p -1.69%
Johnson Matthey (JMAT) 2,859.00p -1.69%
Glencore (GLEN) 366.45p -1.62%
Kingfisher (KGF) 286.60p -1.48%
Fresnillo (FRES) 1,547.00p -1.46%
BHP Billiton (BLT) 1,417.50p -1.43%
Antofagasta (ANTO) 995.00p -1.29%
Mediclinic International (MDC) 739.50p -1.20%
FTSE 250 - Risers
Dunelm Group (DNLM) 665.00p 8.93%
TBC Bank Group (TBCG) 1,631.00p 2.77%
Acacia Mining (ACA) 185.70p 2.20%
Polypipe Group (PLP) 395.80p 2.14%
Cairn Energy (CNE) 180.90p 2.09%
Go-Ahead Group (GOG) 1,577.00p 2.07%
Morgan Advanced Materials (MGAM) 301.90p 1.31%
Grafton Group Units (GFTU) 825.00p 1.29%
Stobart Group Ltd. (STOB) 301.70p 1.24%
Coats Group (COA) 78.20p 1.16%
FTSE 250 - Fallers
Kaz Minerals (KAZ) 783.50p -3.92%
Millennium & Copthorne Hotels (MLC) 437.50p -3.63%
Travis Perkins (TPK) 1,431.00p -3.18%
Hastings Group Holdings (HSTG) 302.10p -3.08%
Dechra Pharmaceuticals (DPH) 2,071.00p -2.68%
Petra Diamonds Ltd.(DI) (PDL) 82.90p -2.59%
Booker Group (BOK) 198.50p -2.55%
Hochschild Mining (HOC) 265.20p -2.36%
esure Group (ESUR) 258.00p -2.31%
Hikma Pharmaceuticals (HIK) 1,175.00p -2.16%