WEDNESDAY MARKET CLOSE: Looming rate hike holds FTSE down

Fears that interest rates will rise sooner than expected sent the FTSE 100 Index into the red after unemployment fell within touching distance of the Bank of England’s 7 per cent target.

As sterling strengthened on the possibility of higher interest rates, the FTSE 100 Index gave back gains made in early trading before the data was published and closed 7.93 points lower at 6,826.33.

Brenda Kelly, chief market strategist at IG, said: “The UK unemployment data, while in itself excellent news for the economy, does tend to take the shine off the riskier assets. Investors are questioning whether the record-low-interest-rate environment can continue for much longer.”

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Financial stocks provided the main drag in the UK benchmark, with Royal Bank of Scotland sliding 3 per cent as various investment houses disagreed on its potential performance. The shares slipped 11p to 348p as Citi and UBS rated it a “sell” while Liberum raised its target price.

Retail payments and accountancy software firm Sage led the risers after it said it was on course to meet next year’s target for 6 per cent organic revenues growth. Shares were up 3 per cent or 13.8p at 426.9p.

Outside the top flight, shares in WH Smith rose 27p to 1,043p after its continued squeeze on costs ensured another “good profits performance” in the last 20 weeks.

And pub chain JD Wetherspoon rose 20p to 809p as it revealed a 6.7 per cent lift in underlying sales for last quarter, including the busy Christmas and New Year period.

On the Alternative Investment Market, North Sea driller Trap Oil was in demand after its latest update indicated its plans are well funded. The shares were up more than 4 per cent at 9.5p.