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London open: Stocks edge up as investors mull UK jobs data
London stocks edged higher in early trade on Tuesday as investors mulled the latest UK jobs report and some disappointing data out of China.
At 0855 BST, the FTSE 100 was up 0.2% at 7,793.02.
Data out earlier showed that Chinese industrial production and retail sales both grew less than forecast in April, fuelling worries that the post-Covid rebound expected to drive the global economic rebound was running out of steam.
Industrial production grew 5.6% in April, well below forecasts of a 10.6% increase. Retail sales were 18.4% higher year-on-year, missing forecasts of 21% growth.
On home shores, figures released by the Office for National Statistics showed that the unemployment rate rose to 3.9% in the three months to March from 3.8% a month earlier, versus expectations for it to be unchanged. The increase was largely driven by people unemployed for over 12 months.
In February to April, the number of vacancies is estimated to have fallen by 55,000 on the quarter to 1.083m. The ONS noted that vacancies fell for the 10th consecutive period, reflecting “uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment”.
The data also showed that growth in average total pay including bonuses was 5.8% and growth in regular pay excluding bonuses was 6.7% in January to March. Adjusted for inflation, however, growth in total and regular pay fell on the year, by 3% and 2%, respectively.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “China’s pandemic snap back is losing elasticity, adding to worries about growth unravelling across the global economy.
“Concerns are also rising that not enough progress is being made to avoid a US default, which would send shockwaves through financial markets. Talks among political leaders to extend the debt ceiling are set to start, but expectations of an immediate breakthrough are low, with Republican House of Representatives Speaker Kevin McCarthy outlining his concerns that big issues are still not close to being resolved. As the clock ticks down, volatility on markets is expected to tick up.”
In equity markets, Smiths Group was boosted by a double upgrade to ‘buy’ at Bank of America Merrill Lynch, while Primark owner AB Foods was higher after an upgrade to ‘outperform’ from ‘sector perform’ at RBC Capital Markets.
Britvic fizzed higher as the drinks company posted a rise in interim profits and revenue and lifted its dividend, as it noted strong demand and standout performances from Tango and Pepsi MAX. It also hailed an “excellent” start to the year.
On the downside, telecoms giant Vodafone slid as it said it expects to post flat earnings next year after reporting a decline in annual profits in a performance described as “not good enough” by its chief executive, who also announced 11,000 job cuts as part of a radical overhaul of the business.
Animal genetics company Genus tumbled as it cut its full-year profit outlook, pointing to “very challenging” market conditions in the porcine business in China.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rolls-royce Holdings Plc | +3.38% | +4.90 | 150.00 |
| 2 |  |
Land Securities Group Plc | +2.61% | +16.20 | 636.20 |
| 3 |  |
Smiths Group Plc | +2.05% | +34.00 | 1,690.00 |
| 4 |  |
Dcc Plc | +2.04% | +95.00 | 4,749.00 |
| 5 |  |
Tui Ag | +1.83% | +9.60 | 535.60 |
| 6 |  |
British Land Company Plc | +1.57% | +5.90 | 381.00 |
| 7 |  |
Diageo Plc | +1.53% | +54.00 | 3,592.00 |
| 8 |  |
Compass Group Plc | +1.43% | +31.00 | 2,198.00 |
| 9 |  |
Centrica Plc | +1.32% | +1.55 | 119.10 |
| 10 |  |
Taylor Wimpey Plc | +1.19% | +1.50 | 127.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Vodafone Group Plc | -4.07% | -3.66 | 86.37 |
| 2 |  |
Prudential Plc | -1.84% | -21.50 | 1,149.50 |
| 3 |  |
Ocado Group Plc | -1.72% | -7.40 | 423.60 |
| 4 |  |
Kingfisher Plc | -1.60% | -4.00 | 245.90 |
| 5 |  |
Wpp Plc | -0.87% | -7.80 | 885.60 |
| 6 |  |
Imperial Brands Plc | -0.85% | -16.00 | 1,857.00 |
| 7 |  |
Auto Trader Group Plc | -0.76% | -4.80 | 630.20 |
| 8 |  |
Bt Group Plc | -0.72% | -1.10 | 152.65 |
| 9 |  |
Croda International Plc | -0.71% | -48.00 | 6,738.00 |
| 10 |  |
Itv Plc | -0.61% | -0.46 | 74.48 |
US close: Stocks rise as investors watch for debt ceiling progress
Wall Street ended the day on a positive note on Monday, with investors holding out hope for a resolution to the ongoing federal debt ceiling discussions.
The Dow Jones Industrial Average closed 0.14% higher at 33,348.60, while the S&P 500 ended the session up 0.3% at 4,136.28, and the tech-heavy Nasdaq Composite gained 0.66% to finish at 12,365.21.
Monday’s gains reflected investor optimism despite contrasting messages from Washington regarding the debt ceiling discussions.
President Joe Biden expressed optimism about the talks on Sunday, but House Speaker Kevin McCarthy said on Monday that the White House and congressional Republicans were still “far apart”.
In currency markets, the dollar was last 0.03% stronger on sterling at 79.84p, while it held steady against the euro, remaining at 91.96 euro cents.
It dipped marginally against the Japanese yen, by 0.02%, to last change hands at JPY 136.09.
“An absolute stinker of an Empire State manufacturing survey for May, just before the open, prompted [pre-market] gains to slowly disappear,” said CMC Markets chief market analyst Michael Hewson earlier.
“After seeing a modest rebound in April to 10.8, it had been forecast that we might see a modest decline to -4, and while the survey did show a decline, it was an even bigger -31.8, prompting US markets to open broadly mixed.”
Manufacturing in NY area sees May downturn
In economic news, manufacturing activity in New York and surrounding areas experienced a significant downturn in May, according to a survey from the Federal Reserve Bank of New York.
The regional factory index, closely monitored by economists and investors, plummeted from 10.8 in April to a disappointing -31.8 in May, a far cry from the predicted consensus of -4.0.
In particular, new orders for businesses, a vital indicator of future activity, took a severe hit.
The corresponding subindex crashed from a robust 25.1 in April to a stark -28.0 in May, signalling a sharp contraction in demand.
However, the survey also revealed that prices paid by firms saw a slight increase, with the subindex nudging up from 33.0 to 34.9, suggesting rising input costs for manufacturers.
On a somewhat positive note, the employment situation in the sector showed signs of improvement.
The hiring subindex saw a moderate increase, improving from -8.0 in April to -3.3 in May, indicating a lessening contraction in employment within the sector.
Kieran Clancy at Pantheon Macroeconomics described the survey results as “more noise than signal, but still not good”.
May’s reading more than reversed the previous month’s surprise spike, which wasn’t reflected in other regional Fed surveys, he said.
But what most caught his eye was the “alarming” slump in the subindex for capital spending intentions by almost 16 points to 0.9.
“Hopes for a sustained recovery in manufacturing rest on the pull to global industry from China’s post-Covid recovery, given the intense pressure on the domestic economy from the Fed’s actions and now the banking crisis,” Clancy said.
“For now, US manufacturing appears to be on its own, and struggling.”
Sarepta Therapeutics surges, Oneok falls on Magellan Midstream acquisition
On New York’s equity markets, Sarepta Therapeutics advanced 30.77% after the Food and Drug Administration (FDA) gave tentative approval of its therapy for Duchenne muscular dystrophy.
NRG Energy also saw an uptick, gaining 3.02% after activist investor Elliot Management revealed a $1bn stake in the company.
Alongside the disclosure, Elliot called for a strategic review of NRG’s Vivint unit.
Newmont Corporation rose 2.5% after it announced a more-than-$17bn deal to acquire ASX-listed Australian gold miner Newcrest Mining.
On the downside, Oneok shares slid 9.06% after the natural gas service provider announced an almost $19.9bn cash-and-shares deal to acquire Magellan Midstream Partners, although Magellan Midstream itself spiked 12.99%.
Tuesday newspaper round-up: Higher-rate taxpayers, low-carbon projects, John Lewis
One in four teachers and one in eight nurses will be higher-rate taxpayers by 2027 as a result of the government’s record freeze on income tax allowances and thresholds, according to a leading thinktank. The Institute for Fiscal Studies said better-paid public sector workers will be among the almost 8 million people – one in five of all taxpayers – who will pay income tax at 40% or above as result of the Treasury’s attempt to reduce the UK’s budget deficit. – Guardian
The energy watchdog for Great Britain will label the decade-long wait to connect low-carbon projects to the electricity grid as “unacceptable”, amid tensions over a “blame game” for a mounting backlog of green power projects. Jonathan Brearley, the chief executive of Ofgem, has written to energy bosses to warn that the current system, whereby energy projects queue for their connection, could be replaced by new methods to match power generation with demand. – Guardian
John Lewis has turned to the advertising agency that helped Margaret Thatcher into Downing Street as the department store seeks to reinvigorate its flagging business. The John Lewis Partnership, which also owns Waitrose, has hired Saatchi & Saatchi to work on all its upcoming adverts including its much anticipated Christmas advert. – Telegraph
The European Commission has given the green light to Microsoft’s merger with Activision Blizzard, putting it at odds with the British competition watchdog which blocked the tie-up last month. The European regulator approved the $68.7 billion deal, subject to promises from Microsoft over the next ten years to ensure that Activision’s games, which include the blockbuster Call of Duty franchise, are freely available across cloud streaming providers. – The Times
British businesses have been urged to supply more “data and information” on how the Treasury’s decision to scrap VAT-free shopping for overseas visitors is hurting the economy, as renewed pressure builds for the policy to be reinstated. The government is facing fresh calls from companies, including the luxury trade body Walpole and Heathrow airport, to restore tax-free shopping for overseas tourists. They warn that London is losing tourism business to cities such as Milan and Paris. – The Times
