By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- London's FTSE 100 index stayed in the
red on Wednesday after data showed U.K. unemployment remained at
7.2% as expected, although jobless claims fell more than forecast.
Attention now turns to finance minister George Osborne's budget
speech, due at lunchtime.
The benchmark fell 0.1% to 6,597.15, paring back after a 0.6%
advance on Tuesday.
Posting one of the biggest losses in the FTSE, shares of Smiths
Group PLC slid 5.9% after the engineering company said profit fell
in the first half of its fiscal year, but that it expects improved
trading in the second half.
Shares of HSBC Holdings PLC (HSBC) gave up 0.8% after Credit
Suisse cut the banking heavyweight to underperform from outperform.
The analysts said they were disappointed the group hasn't been able
to capitalize on its strengths "in terms of funding, liquidity and
exposure to global trade." Instead, the Credit Suisse analysts
prefer Standard Chartered PLC in the U.K./Asian banking space.
Standard Chartered shares slipped 0.6%.
Also declining, Antofagasta PLC dropped 2.9% after Credit Suisse
cut the miner to underperform from neutral.
More broadly in the U.K., investors weighed the latest labor
report from the Office for National Statistics. The unemployment
rate for the three months to January stayed at 7.2%, which means
the "old" Bank of England forward guidance from August stays in
place, as the 7% threshold for considering a rate hike hasn't been
reached.
Meanwhile, the number of people claiming unemployment benefits
fell by a more-than-expected 34,600 in February, while there was a
rise in average earnings in January. All this suggests the
near-term outlook for employment remains optimistic, with a good
chance the 7% joblessness threshold will be reached next month, Sam
Hill, senior U.K. economist at RBC Capital Markets said in a
note.
The minutes from the Bank of England's March meeting offered few
surprises, showing all nine of the central bank's policy-makers
voted unanimously to keep interest rates at a record low of 0.5%
and maintain bond-buying at 375 billion pounds ($622 billion).
At 12:30 p.m. in London, or 8:30 a.m. Eastern Time, U.K.
Chancellor of the Exchequer George Osborne presents his annual
budget to the House of Commons. Markets will be looking for new
growth and deficit forecasts, as well as for spending initiatives.
Osborne has hinted that the budget will include measures to boost
business investment, which is considered a missing piece in the
U.K.'s recovery. The finance minister is further expected to
confirm that spending cuts will be needed until well after the 2015
election. Read: 5 things to watch for in today's U.K. budget
Philip Shaw, chief economist at Investec Securities, said in a
note that there are also hopes that Osborne will reveal tax cuts,
but that such hopes are likely to be dashed.
"The deficit remains at elevated levels, and major tax cuts at
the halfway point in the fiscal adjustment cycle would in our view
be completely inappropriate," he said.
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