ADVFN Morning London Market Report: Tuesday 17 May 2022

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    London open: FTSE, sterling rise as investors mull jobs data

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    London stocks rose in early trade on Tuesday, taking their cue from a positive session in Asia, as investors mulled the latest UK jobs data.

    At 0900 BST, the FTSE 100 was up 0.5% at 7,502.39, but underperforming its European peers as sterling gained 0.8% against the dollar at 1.2423.

    Figures released earlier by the Office for National Statistics showed the unemployment rate declined to a 48-year low in the first three months of the year, but wages were squeezed by surging inflation.

    The unemployment rate fell from 3.8% in the previous quarter to 3.7% – its lowest level since 1974. Analysts had been expecting it to hold steady at 3.8%.

    At the same time, total earnings growth rose to 7% in March from 5.6% in February, but regular earnings growth excluding bonuses only ticked up to 4.2% from 4.1%. Adjusted for prices, average earnings excluding bonuses fell by 1.9% from a year earlier, marking the biggest drop since 2013.

    The figures also showed that the number of vacancies in February to April rose to a new record of 1,295,000, up 33,700 on the previous quarter and 499,300 compared to pre-pandemic levels in January to March 2020.

    Victoria Scholar, head of investment at Interactive Investor, said: “This morning’s figures point to a very tight UK labour market. Record high job vacancies, a falling unemployment rate and a reduction in the overall size of the labour market post-pandemic are giving workers more bargaining power to bid for higher wages and bonuses, prompting a 7% rise in average total pay, adding to the UK’s inflationary conundrum as labour costs increase.

    “The Bank of England governor Andrew Bailey said workers should ‘think and reflect’ before seeking a pay rise in comments that aim to stem spiralling wage inflation but fail to account for the cost-of-living crisis and the struggles that many families are facing.”

    In equity markets, Imperial Brands was the top performer on the FTSE 100 as it reported lower half-year operating profit after accounting for its exit from Russia in response to the invasion of Ukraine, but said it was on track to meet full-year guidance.

    Power generation firm ContourGlobal surged to the top of the FTSE 250 after it agreed to be bought by private equity group KKR for £1.75bn.

    Sales, marketing and support services group DCC rallied as its full-year operating profit beat expectations.

    Drinks group C&C – which owns Bulmers and Magners cider, among others – fizzed higher after saying it swung to a full-year profit as Covid restrictions eased.

    On the downside, Unilever was weaker after a double downgrade to ‘sell’ at Societe Generale.

    Vodafone fell after the mobile telecoms group posted a 5% rise in annual profits as its German operations performed strongly, but warned that inflation was likely to hit current-year figures.

    TI Fluid Systems slumped as it reported a decline in first-quarter revenues and volumes, pointing to supply chain disruptions.

     

    Top 10 FTSE 100 Risers

     

    Top 10 FTSE 100 Fallers

     

    US close: Dow Jones narrowly extends gains

    Wall Street stocks closed mostly lower on Monday ahead of some key retail data and earnings slated for later in the week.

    At the close, the Dow Jones Industrial Average was up 0.08% at 32,223.42, while the S&P 500 was 0.39% weaker at 4,008.01 and the Nasdaq Composite saw out the session 1.20% softer at 11,662.79.

    The Dow closed 26.76 points lower on Monday, narrowly extending gains recorded in the previous session when the blue-chip index managed to snap a six-day losing streak for the blue-chip index.

    Major indices were mostly in the red at the closing bell after ending last week on a positive note as investors switched into relief rally mode and the Nasdaq registered its best daily gain since November 2020, led by hard-hit tech and growth stocks.

    Disappointing Chinese economic numbers were in focus throughout the course of the day on Monday, with data showing that China’s zero-tolerance policy had caused industrial output and consumer spending to slump and hit their lowest level since the Covid-19 pandemic began, with industrial output falling 2.9% in April and retail sales contracting 11.1%. The unemployment rate also climbed to 6.1.

    Also drawing an amount of investor attention was the yield on the benchmark 10-year Treasury note, which slipped below 2.9% on Monday.

    On the macro front, the New York Empire State manufacturing index surprisingly fell to -11.6 in May, down from 24.6 in April to miss market expectations for a reading of 17. According to the Federal Reserve Bank of New York, new orders decreased to -8.8, while shipments fell at the fastest pace since early in the Covid-19 pandemic – tumbling to -15.4 from 34.5 in the previous month. Delivery times also continued to lengthen and inventories expanded.

    In the corporate space, US carrier JetBlue Airways has launched a hostile all-cash takeover bid for rival Spirit Airlines. JetBlue offered Spirit shareholders $30 per share but stated it was willing to “negotiate in good faith a consensual transaction at $33”, subject to receiving necessary diligence.

    Shares in drugmaker Eli Lilly jumped after its drug Mounjaro was granted approval by the Food and Drug Administration to treat Type 2 diabetes. The drug was also being investigated for potential usage in the treatment of obesity.

    No major corporate earnings were released on Monday but the likes of WalmartTarget, and Home Depot will all report before the week is out.

     

    Tuesday newspaper round-up: Twitter, carbon tax, SFO

    Pressure on the government to help those hardest hit by Britain’s cost of living crisis has intensified after the head of one of the country’s leading employers’ groups said immediate support was a “moral imperative”. Tony Danker, the director-general of the CBI, said Rishi Sunak should step in to provide assistance to households skipping meals as a result of rising food and fuel bills. – Guardian

    Elon Musk has suggested that he could seek to pay a lower price for Twitter, as the social media company’s would-be owner expressed further concerns about the presence of fake accounts on the platform. The Tesla CEO said reducing his agreed $54.20 per share offer wouldn’t be “out of the question”, days after putting the $44bn ($36bn) deal “on hold” after he queried the number of spam accounts on Twitter. – Guardian

    The Treasury is plotting a new tax on imports from countries with high carbon emissions as part of a scramble to protect British industry from efforts to go green. Ministers are considering bringing in carbon border taxes to make sure UK businesses who face high domestic carbon costs are not undercut by cheap imports. – Telegraph

    Senior officials at the Serious Fraud Office (SFO) were in “serious breach” of their duties during an investigation into a Kazakh mining company, according to a High Court ruling that piles fresh pressure on the embattled agency. Judge David Waksman found that Neil Gerrard, a former partner at City law firm Dechert, leaked material about his then-client ENRC to the SFO in breach of his own duty of care. – Telegraph

    Tom Cruise isn’t the only one making a comeback: the release this month of Top Gun: Maverick more than 35 years after the original Top Gun comes as the big cinema chains kick-start investment in new theatres. A year after Britain’s cinemas were allowed to reopen, Odeon has announced plans to open its latest upmarket Odeon Luxe venue this summer in Acton, west London. The opening, its first this year, will have nine screens with reclining seats that have three times the standard legroom. Films will be shown on cutting-edge technology, while the food and drink offering has been upgraded. – The Times

     

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