Sterling lifted by strong wage growth

Sterling was given a lift on Tuesday after official figures showed that British workers enjoyed the strongest wage growth since the financial crisis.

The pound was riding high after the Office for National Statistics (ONS) showed that average earnings excluding bonuses grew by 3.1% in the three months to August, the highest level since 2009.

The British currency was trading 0.5% higher versus the US dollar at 1.321 and 0.4% up against the euro at 1.140.

Michael Hewson, chief market analyst at CMC, said: “This is another piece of good news for an economy that continues to be overshadowed by concerns over the current state of Brexit negotiations.

“If tomorrow’s inflation numbers reverse the sudden spike that we saw in the August numbers from 2.4% to 2.7% then that will be double reason to celebrate the return to the types of real wages growth that we saw throughout 2015 and 2016.”

Inflation is forecast to have edged down in September, as a spike in prices for recreational activities cooled off.

Consensus estimates predict the Consumer Prices Index (CPI) of inflation will have dropped to 2.6% for September compared to 2.7% in August.

The pound’s strength weighed on the FTSE 100, although it still managed to end in positive territory.

London’s top flight closed up 30.18 points, or 0.43%, at 7,059.4.

“While its peers raced off into the distance, the FTSE was left panting behind.

“There are plenty more chances for the FTSE to get its revenge, however, not only with Wednesday’s inflation and Thursday’s retail sales data, but the impending, hugely important mid-week summit between EU leaders,” said Connor Campbell, financial analyst at SpreadEx.

Among the biggest risers was Paddy Power Betfair, which was fined £2.2 million by the gambling watchdog for a raft of failings including allowing a punter to gamble money stolen from a dogs home.

The Gambling Commission found “significant” amounts of stolen money had been gambled with Paddy Power’s online exchange Betfair after it failed to carry out proper anti-money laundering checks.

Nevertheless, shares closed up 280p at 6,570p.

On the FTSE 250, meanwhile, Merlin Entertainments sank to the bottom of the index after warning of lingering challenges to its central London attractions after last year’s terror attacks.

Merlin reported “in-line” revenue growth of 4.7% on an organic basis in the 40 weeks to October 6 2018, or 2.6% on a reported basis.

Growth was driven by new business development, which includes the launch of two new brands: Peppa Pig World of Play and The Bear Grylls Adventure.

But Merlin boss Nick Varney told the Press Association that London’s tourist trade has been badly hit by the attacks, and it will take “some time” to return to 2016 levels.

Shares closed down 29.7p at 340p.

In Europe, Germany’s DAX closed up 1.4% and France’s CAC was 1.5% higher.

A barrel of Brent Crude was changing hands at 80.6 US dollars, down 0.1%.

The biggest risers on the FTSE 100 were Ocado up 43.6p at 833.4p, Ashtead up 88.5p at 2,061p, Paddy Power Betfair up 280p at 6,570p and Experian up 74p at 1,807p.

The biggest fallers on the FTSE 100 were British American Tobacco down 154.5p at 3,176.5p, Tesco down 7.4p at 208.6p, Marks & Spencer down 6.7p at 286.1p and Imperial Brands down 46p at 2,541p.