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London open: Stocks edge up after wages data; US earnings eyed
London stocks edged up in early trade on Tuesday as investors mulled an easing in UK wage growth and looked ahead to more US earnings.
At 0830 BST, the FTSE 100 was up 0.3% at 7,653.80.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The FTSE 100 has opened on the front foot as investors assess progress in the easing of inflationary pay demands in the UK, amid some hopes that a US diplomatic dash could stop conflict escalating in the Middle East.
“Wages are retreating from giddy heights, but it’s a slow march down and the Bank of England will continue to keep a wary eye on progress.”
Data released earlier by the Office for National Statistics showed that growth in basic wages eased a little in August.
Average earnings excluding bonuses rose 7.8% in the three months to August versus a year earlier, down from upwardly-revised 7.9% growth the month before. Economists were expecting growth to be unchanged at 7.8%.
Growth in the three months to July was the highest since record began in 2001.
Total earnings including bonuses eased to 8.1% growth from 8.5%, versus consensus expectations of 8.3%.
Investors were also eyeing more earnings releases across the pond.
Richard Hunter, head of markets at Interactive Investor, said: “Around a tenth of the S&P500 are due to report earnings this week, and of the few which have so far stood up to the plate, the vast majority have beaten expectations on both earnings and revenues. Indeed, since the season began in earnest on Friday, estimates for earnings on the whole have been lifted to a likely annual increase of 2.2% from a previous 1.3%.”
In equity markets, Melrose was among the top performers on the FTSE 100 after it lifted its adjusted operating margin outlook for 2023.
Engine maker Rolls-Royce also rallied after saying it will cut up to 2,500 jobs worldwide as part of a plan to streamline the organisation. The company, which currently employs 42,000 worldwide, said the engineering technology & safety segments will come together as a single team across the group, responsible for product safety, engineering standards, process, methods and tools.
Price comparison website Moneysupermarket.com advanced after saying it saw growth accelerate in the third quarter due to high levels of switching in car and home insurance, offsetting the impact of higher interest rates on loan and funding activities.
On the downside, St James’ Place slid after confirming it was overhauling its fee structure. Hargreaves Lansdown also fell.
Housebuilders were under the cosh after Bellway reported an 18.1% fall in underlying full-year pre-tax profit amid a “challenging” market, with demand dented by rising mortgage rates. It also said it now expects far fewer completions in 2024, at around 7,500 homes, down from 10,945.
Jupiter Fund Management tumbled as it posted a decline in third-quarter assets under management as macroeconomic uncertainty continued to weigh on investor demand for risk assets, particularly with retail clients.
Top 10 FTSE 100 Risers
n
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
United Utilities Group Plc | +2.50% | +25.50 | 1,044.50 |
| 2 |  |
Tui Ag | +2.32% | +10.00 | 440.80 |
| 3 |  |
Rolls-royce Holdings Plc | +2.30% | +4.90 | 218.40 |
| 4 |  |
Severn Trent Plc | +2.03% | +51.00 | 2,567.00 |
| 5 |  |
Astrazeneca Plc | +2.02% | +222.00 | 11,194.00 |
| 6 |  |
Melrose Industries Plc | +1.71% | +8.20 | 486.70 |
| 7 |  |
International Consolidated Airlines Group S.a. | +1.24% | +1.80 | 147.10 |
| 8 |  |
Hiscox Ltd | +1.16% | +11.00 | 962.00 |
| 9 |  |
Unilever Plc | +1.12% | +44.00 | 3,982.00 |
| 10 |  |
Centrica Plc | +1.09% | +1.70 | 157.70 |
Top 10 FTSE 100 Fallers
n
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hargreaves Lansdown Plc | -2.26% | -17.20 | 744.60 |
| 2 |  |
Glencore Plc | -1.90% | -8.80 | 453.95 |
| 3 |  |
Antofagasta Plc | -1.74% | -24.50 | 1,384.50 |
| 4 |  |
Anglo American Plc | -1.73% | -39.50 | 2,242.50 |
| 5 |  |
Flutter Entertainment Plc | -1.27% | -170.00 | 13,235.00 |
| 6 |  |
Rio Tinto Plc | -1.21% | -63.00 | 5,154.00 |
| 7 |  |
Croda International Plc | -1.11% | -48.00 | 4,272.00 |
| 8 |  |
Bt Group Plc | -1.08% | -1.30 | 118.65 |
| 9 |  |
Bhp Group Limited | -0.95% | -22.50 | 2,355.50 |
| 10 |  |
Prudential Plc | -0.78% | -7.00 | 891.60 |
US close: Stocks rally ahead of earnings season
US stocks rose strongly on Monday, with the S&P 500 having its best day in nearly two months, as bond yields largely shrugged off ongoing conflict in the Middle East,
Government bonds and gold prices both declined, pulling back after investors poured into safe havens the previous session on the back of rising tensions between Israel and Hamas.
Michael Hewson, analyst at CMC Markets, said the weekend “saw a lot of noise, but little sign that an Israeli incursion into Gaza was imminent, although it still seems likely that it will happen at some point”. He added: “Absent any news out of the Middle East the focus is likely to be on earnings this week.”
This S&P 500 finished at 4,374, up 1.1% on the day – its best daily performance since late-August. The Dow Jones Industrial Average meanwhile gained 0.9% and the Nasdaq rose 1.2%.
Following results from banking heavyweights JPMorgan and Citigroup last week, the coming few days will see earnings from the likes of Tesla, Bank of America, Deliveroo, Goldman Sachs and Netflix.
“Last week’s fears about higher inflation driving renewed Fed rate hikes seem to have dissipated, especially given the low probability of a move in November,” said analyst Chris Beauchamp from IG. “Bulls will be encouraged by tech stocks taking the lead this afternoon, with the Nasdaq 100 feeling more confident ahead of Netflix’s earnings later in the week.”
WTI crude finished 0.8% lower at $87 a barrel after surging on Friday; US 10-year Treasury yields rose 8.2 basis points to 4.709%; while the Dollar Index slipped 0.4% to 106.20.
Pfizer rebounds strongly
Pfizer on Friday slashed its revenue guidance for the full year, citing lower-than-predicted sales of its Covid-19 vaccine. The company also said it would embark on a cost-cutting programme to save $3.5bn annually by next year, which includes layoffs. However, the stock rebounded strongly on Monday after Jefferies upgraded its stance from ‘hold’ to ‘buy’, citing an attractive buying opportunity.
Ford finished in positive territory as the auto maker’s executive chair Bill Ford called for an end to the “acrimonious” negotiations with the UAW, saying the ongoing strikes are threatening the industry’s future.
Chip giant Nvidia finished higher, shrugging off the Reuters report that the US government will tighten restrictions on AI chip exports to China, highlighting Nvidia’s H800 as one of specific products that it wants t.block.
Microsoft gained despite the announcement that its Linkedin division is cutting 670 jobs, adding to the 700 that it had eliminated in May.
Tuesday newspaper round-up: Tax cuts, Linkedin, Carillion
The government has no room for unfunded pre-election tax cuts despite having pushed through a “colossal” £52bn a year stealth raid on household incomes on Rishi Sunak’s watch, the Institute for Fiscal Studies has warned. Britain’s foremost economics thinktank said the dire state of the public finances meant that attention-grabbing tax cuts risked stoking inflation, leading to higher Bank of England interest rates and a lengthy recession. – Guardian
Microsoft’s LinkedIn said on Monday it would lay off 668 employees across its engineering, talent and finance teams in the second round of job cuts this year for the social media network for professionals amid slowing revenue growth. The cuts, which affect more than 3% of the 20,000-strong staff, add to the tens of thousands of job losses this year in the technology sector in the face of an uncertain economic outlook. – Guardian
An Isle of Man bank owned by Brexit backer Jim Mellon has won a City licence that will allow it to accept deposits in the UK. Conister Bank, a subsidiary of Mr Mellon’s Manx Financial Group, has been granted permission by the Bank of England’s Prudential Regulation Authority (PRA) to accept deposits in a bid to boost its balance sheet. – Telegraph
The government dropped its pursuit of five former Carillion non-executive directors late last week, hours before a High Court “test case” was due to begin. The Insolvency Service had been seeking disqualification orders that would have prevented five former board members of the construction group, including Philip Green, the long-serving chairman, from acting as directors, but it dropped the civil action on Friday afternoon. A 13-week trial had been due to begin yesterday. – The Times
Power cables long enough to reach from the Earth to the Moon 200 times over will need to be built globally by 2040 to hit countries’ climate goals, according to a new analysis. The International Energy Agency warned that a failure to deliver the approximately 50 million miles of new and replacement electricity grids that will be needed in the next two decades could jeopardise the transition to clean energy. – The Times
