LONDON MARKETS: Tesco, Sports Direct Lift FTSE 100

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Rebounding from a decline, U.K.'s FTSE 100 index moved higher on Wednesday, supported by gains for Sports Direct International and Tesco. Investors largely shrugged off better-than-expected U.K. labor-market data.

The London benchmark gained 0.7% to close at 6,584.17, climbing back after a 0.6% loss from Tuesday.

Sports Direct International PLC jumped 5.6% to 7.88 pounds ($13.19), after Bank of America Merrill Lynch raised its price target on the sports retailer to GBP10.70 a share, from GBP10.

Tesco PLC also helped drive the U.K. index higher, rising 2.6% after the supermarket chain reported full-year trading profit ahead of analyst expectations. Other food retailers tracked Tesco higher, with shares of Wm Morrison Supermarkets PLC up 0.6% and J Sainsbury PLC 0.4% higher.

Burberry Group PLC (BURBY) tacked on 3.1% after reporting a rise in second-half sales, helped by growth online. The luxury-goods firm warned, however, that it expects currency movements to hurt profit.

Shares of International Consolidated Airlines Group SA climbed 5.1% after HSBC lifted the company to overweight from neutral, according to Dow Jones Newswires.

Aside from corporate news, the main event in the U.K. on Wednesday was the latest labor-market figures from the Office for National Statistics. The unemployment rate fell to 6.9% in the three months to February, below the 7.2% print in January and beating forecasts of 7.1%.

With that drop, the unemployment rate has fallen below the Bank of England's 7% threshold and likely activates the central bank's new "fuzzy" forward guidance on interest rates. Under the new framework, the BOE focuses on a wider range of indicators, including productivity and salary growth, rather than just the unemployment level. The ONS said on Wednesday average earnings, including bonuses, rose 1.7% year-over-year, from 1.4% in January.

"For now though, we note that a pickup in earnings growth isn't expected to unnerve the MPC's stance that rates can remain on hold...for quite some time," Sam Hill, senior U.K. economist at RBC Capital Markets, said in a note.

The pound (GBPUSD), however, climbed to $1.6796, up from $1.6723 late Tuesday, indicating that currency investors interpret the data as a case for higher interest rates. Tighter monetary policy would be supportive for the pound.

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