The FTSE 100 closed 0.37% lower at 10,658.13 on Tuesday, recovering from an intraday low of 10,586.39 as high bond yields, expectations of tighter monetary policy and elevated oil prices kept investors cautious.
The FTSE 250 slipped 0.07% to 23,818.74, while the AIM All-Share fell 0.2% to 783.15.
UK unemployment held at 4.9% in the three months to July, below expectations for 5.0%, while average earnings including bonuses slowed to 3.9% year-on-year from 4.2% previously.
Regular earnings excluding bonuses rose 3.5%, while private-sector regular pay growth stood at 2.9%, below the Bank of England’s 3.0% forecast.
Berenberg said the figures showed domestic inflation pressures continuing to ease, supporting expectations that the Bank of England will leave interest rates unchanged on Thursday. However, elevated oil prices and rising global bond yields continue to increase the risk that rates may need to remain higher for longer.
However, geopolitical concerns remained elevated after fresh Houthi missile and drone attacks on Saudi Arabia and the postponement of planned Gulf-Iran talks over reopening the Strait of Hormuz.
Energy stocks outperformed as oil supply risks remained in focus. Shell gained 1.65%, while BP rose 1.38% after reporting constructive talks with workers at its Whiting refinery in the US.
