LONDON MARKETS: U.K. Stocks Rise After Employment Data

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- U.K. stocks climbed on Wednesday after an upbeat take on the country's labor situation, although shares of Severn Trent PLC sank after a potential offer for the utility fell through.

The FTSE 100 index rose 0.3% to 6,360.15, after a 0.9% loss from Tuesday.

Data on Wednesday from the Office for National Statistics showed the U.K. unemployment rate stayed at 7.8% from February to April as expected, while total pay rose by 1.3% compared with the same period last year. Meanwhile, the number of employed people rose by 24,000 for the period, while the number of unemployed fell by 5,000.

"The quarterly labor market out-turns are typically volatile, and we are careful to not read too much into the single point out-turns. But today's headlines provide us with reassurance that the softer releases of the past couple of months are not turning into a deteriorating trend," said Victoria Clarke, economist at Investec Securities, in a note.

"That is clearly good news, particularly when set against the 'quality' of the jobs recovery, having been steadily building since last summer with job gains increasingly focused in full-time positions," she added.

Among notable movers in the index, shares of Severn Trent PLC sank 9.1% after the consortium seeking to buy the water utility on Tuesday decided to walk away from a potential deal, after three previous conditional offers were rejected.

Vodafone (VOD) fell 0.2% after confirming it made a preliminary approach about making an offer for Kabel Deutschland Holding AG , a German TV and Internet provider. There is no certainty that an offer will be made.

On a more upbeat note, shares of Antofagasta PLC gained 0.7% after the miner said its 2013 performance so far is in line with forecasts made earlier in the year.

Shares of BT Group PLC rose 2.5% to GBP3.13 after Credit Suisse reiterated its outperform rating on the firm and raised the price target to GBP3.50 from GBP3.

"We think BT can continue to cut costs for the next seven years (to 2020), but that the near-term potential for cost cutting is now more fully reflected in both company guidance and BT's share price for the first time since we upgraded BT to outperform [in September 2009]," the analysts said.

Outside the main index in London, shares of Daily Mail & General Trust PLC dropped 1% after Barclays cut the firm to underweight from equal weight.

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