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London open: Stocks edge up as investors digest jobs data
London stocks edged higher in early trade on Tuesday following a positive close on Wall Street, as the latest UK jobs data put pressure on the Bank of England to keep raising interest rates.
At 0825 BST, the FTSE 100 was up 0.2% at 7,585.51.
Figures released earlier by the Office for National Statistics showed that the unemployment rate was a touch lower than expected in three months to April, while wage growth strengthened.
Regular pay excluding bonuses grew 7.2% in February to April, up from 6.8% in the previous three months and ahead of expectations for 6.9% growth. This marked the largest growth rate seen outside of the Covid pandemic.
Average total pay including bonuses grew 6.5% in the three months.
Meanwhile, the unemployment rate came in at 3.8%, up from 3.7% in the previous quarter but down on the 3.9% reported a month earlier and below expectations of 4.0%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Higher than expected wage growth will help households struggling with the cost-of-living crisis but the latest labour market trends risk adding fuel to inflationary fires and are set to make the Bank of England more determined to raise interest rates to put out the flames.
“The increases to minimum wage levels, up almost 10% partly account for the rise, and while hugely welcome for those on low incomes, it comes at a hugely tricky time when policymakers want to see spending power reduced, not bolstered, to help bring down the rate of price increases.
“The pound rose against the dollar on the news heading further towards the $1.26 mark, amid expectations that the Bank of England will keep pushing rates up, while in the United States, the Federal Reserve is poised to press pause tomorrow.”
In equity markets, miners Antofagasta, Rio, Anglo American and Glencore all rose as copper prices advanced.
British Gas owner Centrica also gained after saying annual earnings were set to be at the top end of expectations, driven by “significantly higher” profits at its retail division as customers struggle with soaring energy prices.
Equipment rental firm Ashtead slumped despite hailing a record full-year performance amid “robust” end markets and a strong performance across all geographies.
CMC Markets was also in the red after full-year results, while Admiral was knocked lower by a downgrade to ‘sell’ at Citi.
The bank said it had carried out a “deep dive” into industry loss ratio trends, which suggests that consensus estimates for Admiral are currently an outlier.
“We downgrade Admiral to sell and issue a negative catalyst watch as we expect an earnings expectation reset and material downside risk into 1H23E numbers,” it said.
Housebuilder Bellway edged down after saying it expects lower output and average prices due to a weaker order book and an uncertain interest rate environment.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Carnival Plc | +4.00% | +41.00 | 1,065.50 |
| 2 |  |
Glencore Plc | +3.83% | +16.75 | 453.70 |
| 3 |  |
Rio Tinto Plc | +3.49% | +177.00 | 5,245.00 |
| 4 |  |
Anglo American Plc | +2.92% | +70.50 | 2,487.00 |
| 5 |  |
Bhp Group Limited | +2.26% | +53.50 | 2,424.00 |
| 6 |  |
Antofagasta Plc | +2.16% | +31.50 | 1,487.50 |
| 7 |  |
Spirax-sarco Engineering Plc | +1.78% | +200.00 | 11,460.00 |
| 8 |  |
Fresnillo Plc | +1.30% | +8.40 | 657.00 |
| 9 |  |
Sage Group Plc | +1.20% | +10.40 | 877.80 |
| 10 |  |
Flutter Entertainment Plc | +1.14% | +175.00 | 15,565.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Admiral Group Plc | -6.87% | -160.00 | 2,168.00 |
| 2 |  |
Taylor Wimpey Plc | -2.44% | -2.80 | 111.80 |
| 3 |  |
Direct Line Insurance Group Plc | -2.27% | -3.75 | 161.45 |
| 4 |  |
Barratt Developments Plc | -1.98% | -9.20 | 455.80 |
| 5 |  |
Legal & General Group Plc | -1.75% | -4.20 | 236.20 |
| 6 |  |
British Land Company Plc | -1.66% | -5.70 | 338.20 |
| 7 |  |
Persimmon Plc | -1.52% | -18.50 | 1,202.00 |
| 8 |  |
Hiscox Ltd | -1.51% | -17.00 | 1,107.00 |
| 9 |  |
Land Securities Group Plc | -1.51% | -9.20 | 599.20 |
| 10 |  |
Berkeley Group Holdings (the) Plc | -1.30% | -52.00 | 3,939.00 |
US close: Stocks rise ahead of inflation reading, Fed decision
Wall Street posted some decent gains by the close on Monday, as all the major indices ended in the green.
At the close, the Dow Jones Industrial Average was up 0.56% at 34,066.33 points, while the S&P 500 ascended 0.93% to finish at 4,338.93, reaching its highest level in over a year.
That was closely mirrored by the Nasdaq Composite, which jumped 1.53% to end the session at 13,461.92, marking its own yearly peak.
Monday’s performance was underpinned by the expectation of forthcoming announcements from key central banks across the globe, including the Federal Reserve, the European Central Bank, and the Bank of Japan.
In foreign exchange markets, the dollar saw marginal decreases across the board, falling 0.01% on sterling to trade at 79.93p, while it recorded an equivalent decline against the euro to 92.95 euro cents.
Additionally, it slipped slightly against the yen, last falling 0.01% to change hands at JPY 139.59.
“It has been a notably positive start to a busy week for financial markets,” said IG chief market analyst Chris Beauchamp.
“Stocks have opted to continue their move higher for the time being, expecting US inflation to cool slightly and the Fed to leave rates unchanged.
“Should those assumptions prove wrong we can expect significant volatility across stocks and in the dollar, with the latter likely to see further upside.”
Quiet day for US data as UK looks set to avoid recession
On the economic front, amid an absence of significant data releases stateside, focus shifted across the Atlantic as new data from two prominent organisations pointed to the UK potentially escaping a looming recession.
Both the Confederation of British Industry (CBI) and global auditing firm KPMG presented comparatively buoyant economic predictions for the UK.
The CBI reported an encouraging performance by the UK economy in the first half of the year, exceeding initial expectations and positioning the UK to evade a recession.
It adjusted its initial forecast, which anticipated a 0.4% contraction and 1.6% growth, to a more optimistic outlook predicting growth of 0.4% this year and an enhanced 1.8% in 2024.
The report highlighted strengthening “growth tailwinds” since their previous forecast in December and an anticipated decline in inflation over the year.
It also predicted a reduction in food inflation from the daunting 15.5% in 2023 to a more palatable 4.4% in 2024.
However, it warned of continued inflation threats primarily due to domestic price pressures and wage growth.
The CBI said it further expected the Bank of England to implement two more interest rate increases, pushing rates to 5% by August.
Echoing the CBI, KPMG‘s economic outlook suggested the UK was poised to avoid a recession, attributing that largely to declining energy prices and an enhanced global economic situation.
KPMG noted a tight labour market contributing to stable unemployment rates.
The firm predicted a modest GDP growth of 0.3% for this year and 1.1% for the following year.
However, KPMG warned that the pace of growth remained underwhelming in historical context and significant risks persisted, including stubbornly high inflation, currently standing at 8.7%, potential global banking system disruptions, and the uncertain effects of increased interest rates on the economy.
Chinook Therapeutics surges while Nasdaq tumbles on acquisition news
In equities, biopharmaceutical company Chinook Therapeutics rocketed 58.32% after it agreed to be acquired by Swiss multinational Novartis.
The deal, valued at up to $3.5bn, will see Chinook shareholders receive $40 per share, with an additional contingent value right of up to $4 per share.
The latter would be payable in cash on the achievement of specified regulatory milestones.
Chinook is noted for its two late-stage assets in development, designed for the treatment of a rare progressive chronic kidney disease.
Elsewhere, life science specialist Illumina edged up 3.79% after the abrupt resignation of its chief executive officer Francis deSouza over the weekend.
On the downside, Nasdaq Inc. tumbled 11.81% as investors absorbed news of its agreement to purchase Adenza, a financial software firm, in a deal valued at $10.5bn.
Tuesday newspaper round-up: UK exports, Microsoft/Activision, UBS
Britain has endured the worst exports record of any member of the G7 besides Japan over the last decade, according to a new analysis that will raise pressure on the government to reconsider its post-Brexit trade deal with the EU. As most of the world’s other major seven economies have rebounded from the pandemic, export growth has remained sluggish in the UK at a time when businesses trading with the EU faced extra red tape and costs as a result of the country leaving the bloc. – Guardian
The Federal Trade Commission asked a court to temporarily block Microsoft’s acquisition of Activision Blizzard on Monday, seeking to halt the deal from closing before the government’s case against the $69bn deal is heard. The FTC said Microsoft and Activision had signaled the deal could close as soon as Friday, and asked a federal judge to block any final agreement before 11.59pm ET on 15 June. – Guardian
UBS has axed a raft of senior Credit Suisse executives after the bank completed the takeover of its stricken rival. The Swiss lender said that a slew of Credit Suisse’s most senior bosses will leave the combined company, while others will take on lesser roles, as UBS asserts its dominance following the historic tie-up. – Telegraph
The Financial Conduct Authority is facing mounting scrutiny of its handling of the Crispin Odey scandal amid pressure from MPs for the City regulator to reveal what it knew about misconduct allegations against the hedge fund manager. Odey, 64, was ousted from his eponymous hedge fund group on Saturday as partners at the firm scrambled to stabilise the business in the face of a series of sexual assault and harassment allegations against its founder. – The Times
One of Silicon Valley’s leading venture capital firms has chosen London for its first international office, in a much-needed vote of confidence in the UK’s technology sector. Andreessen Horowitz will open a London arm later this year of its crypto practice, which focuses on blockchain technologies and start-ups, managing about £6 billion of committed capital. The office is set to open this year.- The Times
