ADVFN Morning London Market Report: Tuesday 13 September 2022

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London open: Stocks little changed after UK jobs data, ahead of US inflation

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London stocks were little changed in early trade on Tuesday as investors mulled the latest UK jobs data and looked ahead to the release of US inflation figures.

At 0830 BST, the FTSE 100 was down just 0.1% at 7,464.50.

Data released earlier by the Office for National Statistics showed that real wages continued to fall in July, while the jobless rate dipped to its lowest level since 1974 as more people dropped out of the workforce.

The unemployment rate fell to 3.6% in the three months to July from 3.8% in the previous quarter. Economists were expecting the rate to be unchanged.

The number of people in employment grew by 40,000 in the three-month period. This was the smallest increase since February and was well below consensus expectations for a 128,000 jump. The UK workforce remains 250,000 smaller than it was before the pandemic hit.

Meanwhile, total pay including bonuses rose 5.5% on the year, up from 5.2% and versus expectations of 5.4% growth. Meanwhile, regular pay grew 5.2%, up from 4.7% and compared to consensus expectations of 5.1% growth.

In real terms, however, total pay fell 2.6% and regular pay was down 2.8%.

Oanda market analyst Craig Erlam said: “It’s not often that you see the unemployment rate fall to the lowest in almost 50 years and aren’t overjoyed, but that will certainly be the feeling at the Bank of England right now.

“Less labour market slack and faster wage growth increase the odds of a 75-basis point hike from the Monetary Policy Committee next week, especially against the backdrop of higher core inflation expectations over the medium term as a result of the new cap on energy bills.”

Still to come on the macro front, the US consumer price index for August is due at 1330 BST.

Erlam said: “Perhaps last month’s report has given investors confidence that another faster deceleration could be on the cards for July.

“That may sound premature but the fact is that two consecutive reports showing a sharp deceleration combined with last month’s goldilocks jobs report will be a really encouraging sign and could trigger a broader risk rebound in the markets. It may not be enough to tip the Fed balance in favour of a more modest 50 basis point rate hike next week but it may slow the pace of tightening thereafter.”

In equity markets, software company Aveva rallied following a report it is closing in on a takeover agreement with French industrial group Schneider Electric worth about £9bn. According to Sky News, the boards of the two companies and their advisers are discussing a price of more than £30-a-share for Schneider to acquire the roughly-40% of Aveva it does not already own.

Media company Future was in the black after it said full-year adjusted operating profits were set to be at the top end of market expectations.

Ladbrokes owner Entain was also on the rise after an upgrade to ‘buy’ at HSBC.

On the downside, Ocado tumbled after the online supermarket warned of a fall in annual sales as customers start to tighten their belts amid the cost-of-living crisis.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Fresnillo Plc +2.66% +20.00 772.40
2 Easyjet Plc +1.86% +6.80 371.80
3 Bt Group Plc +1.73% +2.50 147.00
4 Flutter Entertainment Plc +1.63% +175.00 10,885.00
5 Whitbread Plc +1.50% +40.00 2,713.00
6 Burberry Group Plc +1.47% +26.00 1,799.00
7 Bp Plc +1.42% +6.50 464.35
8 Carnival Plc +1.42% +11.20 801.00
9 Rio Tinto Plc +1.22% +60.50 5,005.00
10 Spirax-sarco Engineering Plc +1.18% +130.00 11,190.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Ocado Group Plc -10.69% -85.00 710.20
2 Tesco Plc -2.96% -7.50 245.60
3 Marks And Spencer Group Plc -2.09% -2.65 124.05
4 Melrose Industries Plc -2.05% -2.60 124.05
5 Sainsbury (j) Plc -1.92% -4.10 209.30
6 Next Plc -1.81% -110.00 5,954.00
7 Centrica Plc -1.56% -1.36 85.78
8 Kingfisher Plc -1.25% -3.20 253.70
9 British Land Company Plc -1.16% -4.90 418.00
10 Persimmon Plc -1.12% -17.00 1,502.50

 

US close: Stocks rise ahead of August’s inflation reading

Wall Street stocks finished above the waterline on Monday, as market participants geared up for the release of August’s consumer price index later in the week.

At the close, the Dow Jones Industrial Average was up 0.71% at 32,381.34, as the S&P 500 added 1.06% to 4,110.41, and the Nasdaq Composite advanced 1.27% to 12,266.41.

The Dow closed 229.63 points higher on Monday, extending the gains recorded on Friday when the major indices snapped a three-week losing streak.

Stocks were higher through the session as investors held their breath for last month’s CPI reading on Tuesday, and the Federal Reserve’s next policy meeting later in the month.

The central bank is widely expected to deliver its third straight 0.75% interest rate hike as part of an ongoing effort to fight high inflation, following a similar move by the European Central Bank last week.

“The next Fed decision will soon begin to loom large, and it is likely that even a softer CPI reading in the US this week will not deter the FOMC from another bumper rate hike,” said IG chief market analyst Chris Beauchamp.

“The broader outlook still remains tough, and it makes sense to expect indices to reverse course in the weeks to come.”

Also drawing investor attention was news that the White House was planning to curb shipments of chipmaking tools and chips used for artificial intelligence to China, according to Reuters.

Energy prices were mixed after the closing bell in New York, with West Texas Intermediate futures last up 0.42% at $88.15 per barrel on NYMEX, while Brent crude was unchanged on ICE at $94.00.

Prices for the thick black stuff jumped last week after Vladimir Putin threatened to halt oil and gas exports to Europe.

No major data points were slated for release stateside on Monday, but in corporate news, Twitter slid 1.85% after it described Elon Musk’s most recent attempt to back out of his $44bn bid for the social network as “invalid”.

On the upside, Bristol-Myers Squibb added 3.14% after the drugmaker got approval from the US Food and Drug Administration (FDA) for its plaque psoriasis treatment ‘Sotyktu’.

Elsewhere, banking behemoth Goldman Sachs managed gains of 0.73% after the Wall Street Journal claimed it was planning to lay off “hundreds” of staff from next week.

 

Tuesday newspaper round-up: Banks, Woodford Fund, Abcam

The UK’s largest banks will be tested on their ability to withstand a rise in defaults linked to sky-high energy prices, as part of the Bank of England’s delayed health check of the financial industry. The Guardian understands that Threadneedle Street has crafted a new crisis scenario that will feature a deep economic recession, punctuated by soaring energy bills that could make it harder for some borrowers – particularly businesses – to afford loan repayments. – Guardian

The administrator of the failed fund run by the former star stock-picker Neil Woodford could be forced to pay investors up to £306m in compensation, the City regulator has said. The Financial Conduct Authority said on Monday it was ordering the fund’s administrator, Link, to ringfence the sum as part of conditions related to Link’s takeover by the Canadian cloud-based software company Dye & Durham. – Guardian

Electric car owners will save up to a third on charging their cars thanks to Liz Truss’s energy support pledge. The cost of charging will be held back under the Prime Minister’s plan to cap the cost of electricity units, saving drivers around a third compared to what had been expected from next month. – Telegraph

Abcam is to go ahead with a plan to scrap its London listing after investors backed a proposal by the biotechnology company to have its shares traded solely in New York. The decision by the Cambridge-based business is a blow to the British stock market as it wrestles with competition from foreign exchanges. Abcam has a market capitalisation of almost £3 billion, making it one of the biggest groups on Aim, London’s junior market. It is also quoted on the Nasdaq in America. – The Times

The owners of Asda were dealt a blow yesterday after a leading credit rating agency warned about the highly-leveraged supermarket group’s debts after its £600 million purchase of Co-operative Group’s petrol forecourts. Fitch Ratings said it was cutting its outlook on the investment vehicle that owns Britain’s third-biggest supermarket chain from “stable” to “negative”. – The Times

 

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