Proactive Investors -
- FTSE 100 up 14 points at 8429
- UK unemployment rate rises for third month, to 4.3%
- Results from Vodafone (LON:VOD) and Currys (LON:CURY) impress
BoE economists speak
Economist Michael Saunders, a former member of the rate-setting MPC, and Huw Pill, current chief economist of the BoE and member of the MPC, have both been speaking.
Pill said in a speech that there is "still some work to do" to get inflation down, with persistent inflation "still running at levels that mean we have some way to go" and pay growth rates remain "quite well above" what would be consistent for a rate cut to be made.
Markets are currently pricing a low chance (14%) of a June cut and slightly higher (25.7%) for an August one, but neither are anywhere near nailed on.
Pill, who was speaking at the Institute of Chartered Accountants, said that wage growth, as shown in the ONS figures earlier, is still "quite well above given developments in productivity, what would be consistent with the 2pc inflation target being met on a lasting and sustainable basis".
But he said a rate cut in June or August will "come under consideration" as services inflation “does seem to have peaked”.
Sauders, meanwhile was speaking on BBC Radio 4’s Today programme, where he said rates "will come down soon" but the jobs report has "not much sign of an economic recovery".
"The labour market is starting to react to the sluggish growth that we’ve had in the economy in the last couple of years and I fear there are probably some more job losses to come," he said.
Market analysis
The FTSE 100 went on a little surge, up over 17 points, but has come back a little from there.
Across Europe there is a mixed picture, with the London index joined by Madrid and Milan's benchmarks in green, while Frankfurt and Paris are in red.
Says Naeem Aslam, chief investment officer at Zaye Capital, "European markets have started the day on a downbeat note, while US stock futures are trading flat as investors are unwilling to risk big ahead of important economic data that will unfold in two parts.
"The economic data certainly has the ability to move the markets well away from their mean, while many speculators believe that we are in a goldilocks scenario where bad news is good news for the equity markets and good news is good news. This is because the US equity markets are back near a level where one can see them flirting with their all-time highs."
Aslam is among those expecting the upcoming inflation data tomorrow will be "the key reading" for the Federal Reserve and its monetary policy.
Neil Wilson at Finalto says: "Everyone is hanging on the CPI inflation print tomorrow. Today we get a feel for things with the US PPI and a speech by Fed chair Jay Powell. PPI is seen around +2.2% YoY and core at +2.4%.
"Elevated inflation expectations are a concern for markets. A New York Fed survey showed median one-year inflation expectations in the US rose to 3.3% from 3.0%. Just to underline the difficulty in going ‘the last mile’ once the inflation genie is out of the toothpaste tube."
Meanwhile, following a rally above 1.25 on Monday against a broadly softer dollar, GBP is a bit weaker this morning after employment data.
All else equal, Wilson says, "this should be great for the consumer with real wage continuing to run at levels we have not seen in years."
The ONS data showed the highest level of real pay in two years, with regular pay growth of 6% in the three months to March, versus annual inflation falling from 4% in January to 3.4% in February and 3.2% in March.
However, he points to a "shocking stat to show that wage growth and inflation can remain very stubborn without an increase in output", with UK economic inactivity for people aged 16 to 64 years estimated at 22.1% or between one in five or one in four people.
Anglo 'goes nuclear' but investors say 'meh'
Investors do not seem overly impressed with the Anglo American (JO:AGLJ) restructuring plans.
Analyst Ben Davis at Liberum said Anglo has decided to "go nuclear" on its break up, pointing out that a big re-rating is not likely.
"Anglo American have shown that they don't need BHP's help to do the break up, they will do it themselves," says Davis.
"We had been looking for some clarity on the strategic unlock, a probable sale of coking coal, but this goes well beyond anything we were looking for and many of the challenges on a break up remain."
He says a spin-out of Anglo Platinum will take at least 12 months and have the same regulatory and tax challenges as per BHP's plan, while De Beers is being sold at the bottom of the cycle with significant rough diamond price uncertainty.
All in all he says: "We do not think this will ultimately result in a multiple re-rating, it will still be a diversified miner and trade on a similar multiple it does today."
Greggs , Flutter, Marston's and Revolution
Greggs PLC (LON:GRG), shares down 1.2%, retained its full-year outlook after it reported strong sales growth thanks to evening trade, the expansion of its app and increased takeaway revenues.
Management said the group continued to see like-for-like sales growth despite a challenging market and is therefore maintaining its full-year guidance.
Pub group Marston’s PLC (LSE:MARS) shares are down 3.6% as it reported a positive start to the year and said the upcoming Euros and the Olympics this summer will drive growth further.
A cost-cutting drive has improved margins and enabled a reduction of debt, though a statutory loss of £43.5 million was recorded.
The justification for betting giant Flutter Entertainment PLC (LON:FLTRF) moving its primary listing to the US was writ large in today’s first-quarter results, though the shares are down 2.5%.
US revenues from subsidiary FanDuel grew 32% and it turned an adjusted profit of $26 million compared to a loss of $53 million in the previous year, while the group-wide performance was less appealing as revenues rose 16% and net losses widened to $177 million.
Flutter restated its full-year outlook despite quarterly losses widening. Analysts at Jefferies said "index rebalancing may affect share price performance until end May"
Over at Revolution Bars Group PLC (LON:RBG) a formal sale process initiated by the hospitality chain has failed to yield a suitable offer. Revolution announced the hunt for a potential rescue deal earlier this month, with 32 potential buyers lined up.