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London open: Stocks gain as banks rally; jobs data in focus
London stocks rose in early trade on Tuesday following days of losses, but gains were unspectacular amid worries about more aggressive tightening by the US Federal Reserve.
At 0930 BST, the FTSE 100 was up 0.3% at 7,226.80.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The US market entered bear territory last night, with its main markets dropping to long-forgotten lows. The crux of the concern plaguing investors is how harshly the Fed plans to tackle rising inflation in the face of stark new CPI data.
“Getting the balance wrong and hiking interest rates too aggressively could see recession fears become a reality. Concerns may be partially extinguished by today’s US producer prices index (PPI) report, which has started to suggest signs of slowing recently. This is also seen as a leading indicator, compared to backwards looking data sets like CPI.”
On home shores, figures released earlier by the Office for National Statistics showed the unemployment rate unexpectedly rose in the three months to April for the first time in a year, while vacancies remained at record levels and wages fell at the fastest rate in a decade.
The unemployment rate ticked up to 3.8% from 3.7% in the three months to March and versus expectations for a decline to 3.6%. Still, it remained close to 50-year lows.
The number of people on payrolls rose by 90,000 in May to a fresh record high of 29.6m and the number of job vacancies in March to May hit a new record high of 1.3m.
The data also showed that before inflation, total pay including bonuses grew 6.8% in the year to February-April and regular pay excluding bonuses was up 4.2%. However, real wages adjusted for inflation running at around 9% fell 2.2% on the year – the biggest decline since 2011.
Sam Beckett, ONS head of economic statistics, said: “Today’s figures continue to show a mixed picture for the labour market.
“While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.
“Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before Covid-19 struck.
“At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies.
“Job vacancies are still slowly rising, too. At a new record level of 1.3 million, this is over half a million more than before the onset of the pandemic.
“The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade.”
In equity markets, banks were the standout gainers, with HSBC, Standard Chartered, NatWest and Lloyds all up amid the prospect of higher interest rates.
Paragon Banking Group was in the black after it posted record half-year profits, while housebuilder Crest Nicholson also rose after upgrading its FY22 earnings guidance.
Rail and bus operator FirstGroup, which last week rejected a £1.23bn takeover approach, gained after it reported higher full-year adjusted operating profits as travel recovered from the Covid pandemic.
Go-Ahead surged amid the possibility of a takeover battle as Kelsian said it was still interested in making an offer even after the London-listed transport operator accepted a £647.7m offer from Australian bus firm Kinetic and Spanish infrastructure investor Globalvia Inversiones.
On the downside, equipment rental company Ashtead fell despite saying it had delivered a record full year, with both revenue and profits up following a solid fourth quarter.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Standard Chartered Plc | +2.97% | +17.20 | 596.60 |
| 2 |  |
Fresnillo Plc | +2.94% | +23.20 | 813.20 |
| 3 |  |
Hsbc Holdings Plc | +2.64% | +13.30 | 516.20 |
| 4 |  |
Persimmon Plc | +2.31% | +49.00 | 2,167.00 |
| 5 |  |
Barratt Developments Plc | +2.08% | +9.90 | 485.60 |
| 6 |  |
Lloyds Banking Group Plc | +2.08% | +0.89 | 43.72 |
| 7 |  |
Bt Group Plc | +1.78% | +3.20 | 182.70 |
| 8 |  |
Taylor Wimpey Plc | +1.72% | +2.10 | 124.25 |
| 9 |  |
Land Securities Group Plc | +1.35% | +9.80 | 737.80 |
| 10 |  |
Berkeley Group Holdings (the) Plc | +1.28% | +51.00 | 4,021.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ashtead Group Plc | -5.60% | -213.00 | 3,591.00 |
| 2 |  |
Kingfisher Plc | -3.09% | -7.60 | 238.00 |
| 3 |  |
Flutter Entertainment Plc | -2.70% | -222.00 | 7,994.00 |
| 4 |  |
Ocado Group Plc | -2.55% | -22.40 | 857.60 |
| 5 |  |
Halma Plc | -2.42% | -48.50 | 1,953.50 |
| 6 |  |
Ferguson Plc | -2.41% | -216.00 | 8,736.00 |
| 7 |  |
Croda International Plc | -2.39% | -148.00 | 6,044.00 |
| 8 |  |
Next Plc | -1.81% | -110.00 | 5,976.00 |
| 9 |  |
Rentokil Initial Plc | -1.74% | -8.20 | 464.20 |
| 10 |  |
Experian Plc | -1.68% | -40.00 | 2,338.00 |
US close: Stocks lower as CPI reading continues to weigh on sentiment
Wall Street stocks closed sharply lower on Monday as last month’s hotter-than-expected CPI reading and expectations of a Federal Reserve rate hike later in the week remained in focus.
At the close, the Dow Jones Industrial Average was down 2.79% at 30,516.74, while the S&P 500 was 3.88% weaker at 3,749.63 and the Nasdaq Composite saw out the session 4.68% softer at 10,809.23.
The Dow closed 876.05 points lower on Monday and the S&P 500 fell back into bear market territory, hitting a new intraday low for the year and its lowest level since March 2021, as market participants zeroed in revelations that the consumer price index had risen 8.6% year-on-year in May, its fastest increase since December 1981.
The short-term two-year Treasury yield rose almost 30 basis points to 3.367% on Monday, its highest level in more than 15 years, as Wall Street traders continued to bet the central bank will likely have to get even more aggressive than initially expected in order to squash inflation.
The two-year note also traded above the 10-year note before the open on Monday – a move often seen as a recession indicator – however, the yield on the benchmark 10-year Treasury note later advanced more than 21 basis points to sit up above its two-year counterpart at 3.381%.
Also in focus, gasoline prices exceeded $5 per gallon over the weekend, exacerbating concerns stemming from rising inflation and falling consumer confidence and sending recession-sensitive stocks like Boeing, Marriott, Hilton, and Delta Airlines down on the session.
Bitcoin slumped from more than $29,000 on Friday to less than $24,000 on Monday amid efforts by risk-averse investors to cryptocurrency assets amid rising rates.
On the macro front, consumer inflation expectations for May rose to 6.6%, up from 6.3% in April and matching March’s record high.
In the corporate space, Oracle shares were up roughly 9% in extended trading after the software giant posted strong quarterly cloud revenues.
Tuesday newspaper round-up: HBOS, energy deal, Shell, British Airways
Victims of one of Britain’s biggest banking frauds will each be offered £3m compensation packages, according to a source familiar with the proposed deal expected to be announced later this week. Halifax Bank of Scotland (HBOS) – which is now part of Lloyds Banking Group – was involved in a major fraud at its Reading branch in the early 2000s. – Guardian
The UK government is close to striking a deal to keep a coal-fired power station in Nottinghamshire open longer than planned as ministers attempt to shore up Britain’s energy supplies. UK officials are in negotiations with the French energy company EDF over plans to extend the operations of the West Burton A power station near Retford. – Guardian
Shell is pursuing a significant expansion of its business supplying electricity to UK households amid intense volatility in energy markets. The FTSE 100 company wants to supply clean power to five million households and electric car drivers by 2030, up from about 1.5m today, as part of plans to diversify away from oil and gas. – Telegraph
British Airways is facing a summer of strikes after ground and cabin staff backed industrial action in a dispute over pay. Unite, which represents 16,000 BA workers, won a 97pc majority in a ballot for potential industrial action after claiming the airline reneged on a pay deal. The union, the UK’s second largest, is also balloting 500 check-in staff on strikes that could be staged in July when demand is expected to surge. – Telegraph
More than one in every five pounds paid so far by taxpayers to cover bank losses on failed pandemic loans relates to credit issued to suspected fraudsters. New figures show that by the end of March, the government had settled £351 million of claims on the state guarantee to lenders who issued credit under the emergency bounce back loan scheme, £72 million of which banks had marked as potentially fraudulent. – The Times
