London midday: Stocks drop on UK jobs data, China woes, Greek concerns

LONDON (ShareCast) - (ShareCast News) - Worse-than-expected UK jobs data and another devaluation of the yuan by China's central bank sent London-listed stocks lower on Wednesday at midday. The number of people employed in the UK in the three months to June fell 63,000 to 31.035m, more than the 55,000 drop expected by analysts, the Office for National Statistics revealed.

Average weekly earnings increased 2.4% during the period, compared to a forecast for a 2.8% gain.

The number of unemployed people in Britain rose by 25,000 to 1.85m, 221,000 less than a year ago.

The unemployment rate held at 5.6%, as predicted.

"The latest official labour market report brought a raft of disappointing news, with unemployment remaining unchanged, employment falling and headline pay growth slipping lower," said Chris Wiliamson, chief economist at Markit (NasdaqGS: MRKT - news) . "Sterling has consequently taken a hit as expectations of when the Bank of England will hike rates have been pushed back." The BoE last week decided to keep interest rates unchanged at 0.5% as Governor Mark Carney said the timing of an increase was drawing closer but the exact timing could not be predicted and will be "data dependent".

Meanwhile the People's Bank of China (HKSE: 3988-OL.HK - news) has moved again to cut its national currency, the yuan, by another 1.6%, after Tuesday's 1.9% devaluation. The action was the biggest two-day lowering of the yuan against the dollar in more than two decades.

China's commerce ministry said the lower rate would help struggling exporters.

Accendo Markets analysts Mike van Dulken and Augustin Edin said the decision has fuelled "concern that market volatility from a new round of currency wars could curb global growth outlook".

"With yesterday's move giving rise to worries that growth in the world's No.2 economy is even slower than thought/published, today's move just before another round of weak China data just adds fuel to the fire with Retail Sales, Industrial Production and Fixed Asset Investment all missing consensus and slowing in July," they added.

Chinese industrial production rose 6% year-on-year in July, well below forecasts for an increase of 6.6% and the previous month's 6.8% gain.

Chinese retail sales climbed 10.5% in July, compared to analysts' projections for a 10.6% rise in line with June's growth.

"The data are weaker than expected which will undoubtedly add to speculation that policymakers are trying to engineer a sustained devaluation of the renminbi in order to shore up growth," said Julian Evans-Pritchard, China economist at Capital Economics.

In the Eurozone, Greece's parliament is meeting for an emergency session to ratify the text of a new multibillion-euro bailout, according to the parliament website. Several media reports suggested that the deal may not have the full support of all the EU capital and the timing of the crucial vote remained uncertain.

Prime minister Alexis Tsipras called for the meeting after the government reached an outline agreement with its creditors early on Tuesday for an €85bn bailout package.

The government wants parliament to approve its third bailout so it can be passed to Eurozone finance ministers to vote at a meeting planned for Friday. Greece needs the funds before a €3.4bn debt payment is due to the European Central Bank on 20 August.

Company news Pearson (Xetra: 858266 - news) edged down after selling a 50% stake in the Economist Group to existing shareholders for £469m.

Unilever (NYSE: UL - news) slumped after Goldman Sachs (NYSE: GS-PB - news) downgraded the stock to 'sell' from 'neutral' and cut its target price to 2,560p from 2,820p.

G4S (Copenhagen: G4S.CO - news) declined after the outsourcing and security group reported a 12.5% drop in first-half profit, reflecting restructuring charges and one-off costs.

Reckitt Benckiser (Xetra: A0M1W6 - news) was in the red after being ordered to license the K-Y personal-lubricant brand in Britain to a competitor for eight years after the UK competition regulator found that its purchase of the label could lead to price increases.

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