ADVFN Morning London Market Report: Tuesday 13 December 2022

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


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

At 0850 GMT, the FTSE 100 was up just 0.1% at 7,450.40.

Figures released earlier by the Office for National Statistics showed that the number of people unemployed ticked higher in October as real term wages fell.

The jobless rate rose 0.1 percentage point in the three months to October, to 3.7%.

Growth for both average total pay – which includes bonuses – and regular pay, which excludes them, was 6.1% over the three months, the strongest increase outside of the pandemic period. However, once adjusted for inflation, total and regular pay both fell in real terms by 2.7% year-on-year. The ONS said the fall was among the largest since comparable records began in 2001.

Average regular pay growth for the private sector was 6.9%, and 2.7% for the public sector.

The ONS said that 417,000 working days were lost because of labour disputes in October, the highest since November 2011. Another wave of industrial action gets underway this week, with rail workers, nurses and postal staff all due to strike over pay and working conditions.

The ONS data also showed an uptick in the employment rate, however, which rose 0.2 percentage points to 75.6%. The number of employees increased during the period, while the number of self-employed fell.

The economic activity rate also fell, declining by 0.2 percentage points to 21.5%, which the ONS said was driven by people aged 50 to 64.

Oanda market analyst Craig Erlam said: “While the data does indicate some additional slack in the labour market, the wages number – despite falling well short of inflation – will be of concern to the Bank of England and ensure its foot remains firmly on the brake in the short term.”

Investors were also eyeing the release of the US consumer price index for November, due at 1330 GMT.

Erlam said: “Last month’s CPI release gave investors real hope that in much the same way that inflation’s acceleration higher this year blew expectations out of the water, the path lower may also not be as gradual as feared.

“Unfortunately, some of the data since then hasn’t been so favourable – most notably the wages component of the jobs report – so a lot is now hanging on today’s release. Another number below forecasts of around 7.3%, year on year, could get the excitement flowing once more.”

In equity markets, Synthomer rallied after saying it had sold its laminates, films and coated fabrics businesses to Surteco North America for $255m (£208m). The cash will be used to repay debt in order to strengthen the group’s balance sheet and support a reduction in leverage, the company said.

On the downside, engine maker Rolls-Royce was under the cosh as JPMorgan Cazenove maintained its ‘underweight’ rating on the shares and placed them on ‘negative catalyst watch’.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Tui Ag +3.03% +4.35 148.10
2 Prudential Plc +2.92% +31.00 1,092.00
3 Smurfit Kappa Group Plc +2.44% +73.00 3,070.00
4 International Consolidated Airlines Group S.a. +2.16% +2.86 135.20
5 Johnson Matthey Plc +1.90% +39.00 2,087.00
6 Bp Plc +1.67% +7.70 469.80
7 Hsbc Holdings Plc +1.60% +7.95 504.30
8 Flutter Entertainment Plc +1.42% +170.00 12,155.00
9 Mondi Plc +1.38% +20.00 1,472.00
10 Legal & General Group Plc +1.27% +3.20 255.20


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc -3.39% -3.15 89.69
2 Bae Systems Plc -1.40% -11.60 819.40
3 Experian Plc -1.30% -38.00 2,886.00
4 Easyjet Plc -1.13% -4.30 375.50
5 Relx Plc -1.07% -25.00 2,305.00
6 Rentokil Initial Plc -0.90% -4.80 528.60
7 Sse Plc -0.85% -14.50 1,682.00
8 Next Plc -0.76% -44.00 5,742.00
9 Intertek Group Plc -0.66% -27.00 4,043.00
10 Berkeley Group Holdings (the) Plc -0.66% -25.00 3,775.00


US close: Dow adds 500 points amid storm of deal news

Wall Street stocks were in the green at the closing bell on Monday, as market participants remained focussed on the Federal Reserve’s ongoing fight against inflation.

At the close, the Dow Jones Industrial Average was up 1.58% at 34,005.04, as the S&P 500 added 1.43% to 3,990.56 and the Nasdaq Composite was ahead 1.26% at 11,143.74.

The Dow closed 528.58 points higher on Monday, easily extending the gains it recorded in Friday’s session.

“US markets have opened modestly higher, paring back some of Friday’s late sell-off with investors broadly side-lined ahead of tomorrow’s consumer price index report, and Wednesday’s Fed meeting,” said CMC Markets chief market analyst Michael Hewson earlier.

“The slight pullback in US yields is helping to underpin a slightly firmer tone in early trade.”

Stocks were higher from the start of trading on Monday, as market participants looked ahead to the release of November’s consumer price index on Tuesday, where investors were keen for hints that inflation could be slowing.

The central bank’s two-day meeting was also in their sights, with the Federal Reserve expected to announce another interest rate hike – albeit smaller – on Wednesday.

In economic news, the New York Fed’s survey of consumer expectations for November saw respondents seeing inflation slowing in both one year and three years’ time.

The survey showed consumers saw the rate of price inflation running at 5.2% a year from now, down from a previous 5.9%, making for what the New York Fed called the biggest month-on-month decline in the survey’s history.

Looking ahead three years, survey respondents saw inflation of 3%, down slightly from the 3.1% they pencilled in at October’s survey.

In equities, takeover deals hogged the headlines, with Horizon Therapeutics rocketing 15.49% after news broke that the firm had agreed to be acquired by Amgen in a deal valuing it at more than $27bn on a fully-diluted basis.

“Amgen shares have slipped back a touch after announcing it was paying $28bn for Horizon Therapeutics in a deal that saw it ease out the likes of Sanofi and Johnson & Johnson,” CMC’s Michael Hewson noted.

“The initial underperformance in the Amgen share price suggests a concern that they might be overpaying for Horizon.”

Amgen itself slipped 0.67% by the end of trading.

Elsewhere, Coupa Software surged 26.67% after it agreed to be taken private by Thomas Bravo in an $8bn deal that would see shareholders receive a 77% premium to the price before takeover chatter began.

Barbecue grill maker Weber served up a 23.23% rise after it agreed to be taken private by BDT Capital Partners, which will buy the shares it did not already own for $8.05 apiece to value the firm at $3.7bn.

On the downside, Rivian Automotive slid 6.16% after the electric vehicle producer backed out of a plan to team up with Mercedes-Benz on van manufacturing in Europe, just three months after announcing it.

“Rivian shares have slumped sharply after pulling out of its joint venture with Mercedes-Benz to build an electric van in Europe,” Hewson added.

“This is a huge blow to the company’s aspirations of growing its global footprint, especially given the fanfare that surrounded the initial announcement three months ago.

“The decision to pull out of the deal suggests uncertainty about its ability to deliver on its aspirations, coming as it does against a backdrop of product recalls and supply chain issues.”


Tuesday newspaper round-up: Rail strikes, gas shortages, easyJet

Shoppers tearing their hair out in the search for Christmas presents online amid strike-hit parcel deliveries have been urged to try a low-tech solution: their local high street. With a quarter of annual toy sales rung up in December, the boss of The Entertainer toy chain told the Guardian it had been forced to extend its delivery window to up to seven days and drop its next-day offer due to the holdups. – Guardian

Thousands of rail workers have rebelled against union leaders by voting in favour of a pay deal. Some 36.4pc of Rail, Maritime and Transport workers union (RMT) members backed an offer of a 9pc pay rise in a show of defiance against leader Mick Lynch. Mr Lynch, however, insisted that there was a “huge rejection” of the offer among RMT members, with 63.6pc of those voting against the pay deal. The rebellion was not enough to call off strikes over Christmas and the New Year. – Telegraph

Rolls Royce has long been at the vanguard of Britain’s nuclear industry, with more than half of the UK’s £385m fund to support advanced projects in the field allocated to Rolls’s mini-nukes programme. But the company’s dominance is now being challenged by a new breed of scrappy start-ups who believe their technology could make Britain a world leader in nuclear power. – Telegraph

Europe must take urgent action to prevent a gas shortage next year in the absence of supplies from Russia, the European Commission and the International Energy Agency have warned. Gas demand must be reduced by improving energy efficiency and by installing more renewable power generation and electric heat pumps, they said, while gas supplies must be bolstered by jointly procuring more gas from elsewhere. – The Times

EasyJet’s chief executive was handed a pay package worth almost £3 million this year even after the airline made a substantial loss and was forced to cancel thousands of flights because of a lack of staff. Johan Lundgren has been given an annual bonus of £1.2 million on top of his fixed pay of £833,000, as well as shares worth £925,000. Kenton Jarvis, the chief financial officer, received a total of £2.1 million — his salary and other benefits are worth £860,000, plus £1.26 million in variable compensation. – The Times


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