This morning saw a lower than expected rise in the UK claimant count change, with the news coming as a further piece of evidence that the decision this year to leave the EU has had little by the way of short term adverse effects on the economy. The pound rose to its highest level in 8 days shortly after the release, whilst the FTSE moved down to its lowest level of the day.
Labour market remains robust
The latest employment data from the UK has come in better than expected, further supporting the theory that the country is yet to experience any significant tangible effects from the Brexit vote. After an initial knee-jerk reaction in industry surveys for July, the UK economy has been continuing along nicely as far as data points are concerned with both employment and retail sales figures being strong in the latter part of the summer. However it should be noted that while the unemployment rate of 4.9% remains near a record low, this data has a substantial lag of 45 days, so today's release is in fact an accurate reflection of August. Even though the claimant count figure is only 15 days behind, this is still dated given the recent developments in the Brexit situation. Therefore recent issues surrounding a ‘hard’ Brexit will not be fairly reflected and any optimism should be carefully checked, with the re-emergence of concerns due to the plummeting value of sterling occurring in a period after which this morning's release focuses on. Nonetheless, the pound has reacted positively to the news and risen to its highest level in just over a week.
FTSE moves back below 7000
The FTSE 100 has moved lower by 22 points this morning and in doing so failed to gain traction above the key psychological level of 7000. Despite the broader decline for the index several shares are enjoying moves higher, with Burberry leading the way in rising by more than 2% after Tuesday’s decline. Mining stocks are also relatively well supported with Anglo American (LON:AAL) and Glencore (LON:GLEN) in positive territory, with the latest Chinese growth figures coming in line with expectations overnight and suggesting that the world’s second largest economy is still performing well.
Travis Perkins (LON:TPK) missing earnings estimates
At the foot of the UK blue chip index is Travis Perkins with the share price lower by around 7% after the latest trading update was released this morning. The release came in below expectations as the building firm's earnings missed many analysts’ forecasts. Despite a 3.1% increase in like for like revenue it has been a challenging six months for the builders’ merchant, with the Brexit vote shock in particular weighing on price. As the situation regarding the relationship between the UK and EU is poised to only get more complicated going forward, the trading environment for the firm continues to face strong headwinds and in light of such, for 2017 the firm's forward guidance highlights elevated levels of uncertainty. It has been a bumpy ride for investors over the last 6 months with a 17% drop in the share price testing the resolve as some have chosen to abandon the firm in lieu of trying to ride out the potential downturn from the UK's decision to leave the EU. The waters ahead remain choppy and there could very well be more setbacks for Travis Perkins before trading conditions settle and a recovery in the stock's price takes hold.