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London open: Stocks edge lower after UK jobs data, ahead of US CPI
London stocks edged lower in early trade on Tuesday as investors mulled the latest UK jobs data and looked ahead to a key US inflation reading.
At 0840 GMT, the FTSE 100 was down 0.2% at 7,557.55.
According to the Office for National Statistics, the UK unemployment rate eased at the end of last year, while average earnings continued to rise.
The unemployment rate was 3.8% for those aged 16 and over in the three months to December. That was down on November’s rate of 4.2% and below consensus for 4.0%.
The economic inactivity rate was 21.9%, up from 20.9% in November. The ONS said the increase was driven by the number of people who are long-term sick, which remains at “historically” high levels.
The claimant count for January increased by 14,100 on the month, or by 61,200 on the year, to 1.579m. The employment rate was 75.0%.
Vacancies, meanwhile, fell by 26,000 in the quarter to 932,000. It is the nineteenth consecutive month vacancies have fallen, although they still remain above pre-pandemic levels.
Wage growth beat forecasts. Annual growth in employees’ average regular earnings, excluding bonuses, was 6.2%, in contrast to consensus for 6.0%. Including bonuses, wages grew by 5.8%.
Both measures were down on November, however, when total pay rose by 6.7% and regular pay by 6.6%
Annual growth in real terms, which is adjusted for inflation, for total pay in December was 1.4% and 1.8% for regular pay.
A total of 108,000 working days were lost in December because of labour disputes.
The ONS is currently changing its methodology, after too few people responded to the surveys. It therefore noted that Labour Force Survey estimates should be treated with “additional caution” because of the smaller sample sizes.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Wage growth in the UK is cooling but may still be hot to handle for the Bank of England policymakers who may keep their distance from rate cuts for a little bit longer.
““The FTSE 100 has opened in the red, as investors assess there is still considerable way to go before stubborn inflation has been tamed. Inflation busting pay rises are still the norm, and there is concern that if staff costs stay high, businesses will be more reluctant to stem price increases. There were buds of hope of an interest rate cut in May, but they may now be pruned back, depending what Wednesday’s CPI data reveals about broader price pressures.”
Still to come on the macro front, the US consumer price index for January is due at 1330 GMT.
In equity markets, travel firm TUI rallied as it reported a positive quarterly underlying profit for the first time after a record performance in the first quarter, and reiterated its guidance for the full year.
The company booked underlying earnings before interest and tax of €6m for the three months to 31 December, moving into the black for the first time since the merger of TUI AG and TUI Travel PLC in 2014.
Group revenues were up 15% year-on-year at €4.3bn, driven by higher demand at improved rates and prices, the company said.
Aston Martin Lagonda rose after executive chairman Lawrence Stroll confirmed the luxury car maker is in talks with bankers to address a looming debt pile, with the company’s near-term liabilities amounting to around $1.4bn.
In broker note action, GSK gained after an upgrade to ‘buy’ from ‘neutral’ at Citi.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Tui Ag | +2.85% | +16.50 | 596.00 |
| 2 |  |
Astrazeneca Plc | +1.57% | +149.00 | 9,650.00 |
| 3 |  |
Easyjet Plc | +1.54% | +8.40 | 555.20 |
| 4 |  |
Gsk Plc | +0.86% | +14.00 | 1,640.40 |
| 5 |  |
Severn Trent Plc | +0.80% | +20.00 | 2,515.00 |
| 6 |  |
Bunzl Plc | +0.66% | +21.00 | 3,219.00 |
| 7 |  |
Centrica Plc | +0.60% | +0.80 | 135.25 |
| 8 |  |
Smith (ds) Plc | +0.59% | +1.90 | 321.40 |
| 9 |  |
United Utilities Group Plc | +0.58% | +6.00 | 1,038.00 |
| 10 |  |
National Grid Plc | +0.55% | +5.50 | 1,007.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Scottish Mortgage Investment Trust Plc | -1.91% | -15.40 | 791.40 |
| 2 |  |
Rolls-royce Holdings Plc | -1.68% | -5.20 | 303.90 |
| 3 |  |
Rightmove Plc | -1.67% | -9.20 | 542.60 |
| 4 |  |
Persimmon Plc | -1.66% | -23.50 | 1,395.50 |
| 5 |  |
Wpp Plc | -1.62% | -12.60 | 765.40 |
| 6 |  |
Dcc Plc | -1.50% | -86.00 | 5,630.00 |
| 7 |  |
Melrose Industries Plc | -1.31% | -7.80 | 586.20 |
| 8 |  |
Crh Plc | -1.26% | -74.00 | 5,800.00 |
| 9 |  |
Intertek Group Plc | -1.20% | -53.00 | 4,363.00 |
| 10 |  |
Prudential Plc | -1.16% | -9.40 | 803.00 |
US close: Stocks mixed ahead of inflation data, but Dow hits another record
US equity markets finished mixed on Monday as stocks searched for direction ahead of key inflation data, with the Nasdaq and S&P 500 slipping into the red but the Dow notching its 12th record close of the year.
The S&P 500 and the Nasdaq, which had been trading higher earlier on, took a dive in late-afternoon trade to finish down 0.09% and 0.30%, respectively, while the Dow gained 0.3% to 38,797.38 – a new all-time closing high.
“Tomorrow’s CPI reading in the US promises to be the main event of the week,” said Chris Beauchamp, analyst at IG. The year-on-year change in the consumer price index is forecast to be 2.9% in January, slowing sharply from 3.4% in December. If data meets the consensus forecast, this would represent the lowest rate of inflation since March 2021.
“Price growth is expected to keep slowing towards the Fed’s target, so investors will be hoping for a bigger-than-expected drop in order to provide the foundations of a rally to fresh record highs for US indices,” Beauchamp said.
However, on Monday, Federal Reserve governor Michelle Bowman said it was “too soon to predict” when the central bank will look to start cutting interest rates or even just how far the cuts will go, adding that she does not think it appropriate to begin cuts in the “immediate future.”
The corporate earnings calendar was relatively quiet on Monday after a busy few weeks, but things will pick up in the coming days, with Lyft, DoorDash, Kraft Heinz, Hasbro and Coca-Cola all set to report before the week is out.
VF Corp surges
Struggling Vans and North Face owner VF Corp surged 14% on reports that activist investor Engaged Capital won the backing of a member of VF’s founding family to push for a board seat to drive quicker change. The move comes just a week after the company missed profits forecasts for its fiscal third quarter by a wide margin.
Oil and gas company Diamondback Energy gained 9% after agreeing to buy rival Endeavor Energy Resources in a $26bn deal. The consideration will consist of around 117.3m shares of Diamondback common stock and $8bn in cash. Diamondback will own approximately 60.5% of the combined entity, while Endeavor’s equity holders will own the rest.
Biotech firm AbbVie was out of favour after cutting its forecasts for its first quarter due to the dilutive effect of its ImmunoGen acquisition.
Meanwhile, discount retailer Big Lots dropped 28% despite meeting expectations with its fourth-quarter results as broker Loop Capital downgraded the stock from ‘hold’ to ‘sell’ on the back of the company’s “precarious” finances and said its outlook was “very concerning”. “We believe Big Lots has lost substantial consumer relevance and mindshare, which in our long experience is very difficult – if not impossible – to regain,” Loop Capital said.
Tuesday newspaper round-up: Nuclear reactors, ITV, Metro Bank
MPs have warned that a planned fleet of small nuclear reactors are unlikely to contribute to hitting a key target in decarbonising Britain’s electricity generation, as the government opened talks to buy a site in Wales for a new power station. The Environmental Audit Committee (EAC) said that ministers’ approach to developing factory-built nuclear power plants “lacks clarity” and their role in hitting a goal of moving the grid to clean energy by 2035 was unclear. – Guardian
The former Post Office boss Paula Vennells gave Fujitsu a bonus contract in 2013 to take over an archive of branch data, despite warnings such a move would destroy evidence that might clear operators, whistleblowers have said. Transaction information was “replatformed” on cost grounds from a “gold standard” external storage system known as Centera to one owned by the Japanese software company running the Post Office’s Horizon IT network. – Guardian
A Mayfair fund has taken a £120m stake in ITV as the broadcaster grapples with a deep advertising downturn and slump in its market value. Silchester International Investors has become one of ITV’s largest shareholders after snapping up a 5pc stake in the business. The media-shy fund, which has also built a £500m stake in advertising giant WPP, states that its investment philosophy is to identify fairly valued businesses “capable of increasing earnings, assets and dividends by their own efforts”. – Telegraph
A crisis that almost brought down Metro Bank in the autumn has derailed its plan to open branches and create jobs in the north of England in return for a £70 million grant. Metro had pledged to take on 300 staff to serve 15 new high street sites by the end of next year as part of commitments made to secure money from a £775 million pot. The funding was meant to increase competition and services in business banking. – The Times
Staff at RSM and Quantuma are alleged to have wrongfully received tip-offs about potential work from government insolvency staff in a scandal that is being examined by regulators and that has led to the dismissals of least four people. Employees of the accountancy and restructuring firms allegedly received “case data” from staff at the Official Receiver, part of the government’s Insolvency Service. – The Times
