Proactive Investors -
- FTSE 100 advances, up 20 points
- Miners lead risers as Chinese GDP tops forecasts
- Wage growth puts MPC rate call on a knife edge
Miners lead the FTSE 100 higher
The FTSE 100 is holding above 7,900 once more despite the pick up in wage growth in February.
Mining companies lead the risers with Fresnillo (LON:FRES), Anglo American (LON:AAL) and Antofagasta (LON:ANTO) all advancing encouraged by China’s strong GDP numbers boosting hopes for increased demand.
At 9.00am the lead index rose to 7,899.15, up 19.64 points, or 0.25%.
ING Economics said “for those of us expecting the Bank of England to keep interest rates unchanged next month, the latest surprise pick-up in UK wage growth undoubtedly puts a spanner in the works.”
ING economist James Smith noted: “The headline measure, which compares the most recent three-month period to a year ago, saw regular pay growth pick up to 6.6% from 6.5% previously.”
But importantly, ING pointed out momentum is still lower than it was a few months ago.
He felt the surprise pick-up in UK wage growth casts doubt over recent indications that pay pressures have started to ease while a similar surprise blowout in services inflation would inevitably move the dial in favour of a 25bp rate from the Bank of England next month.
British Airways (LON:ICAG) owner, IAG, rose 1.5% lifted by encouraging trading figures from easyJet (LON:EZJ) plus the Chinese economic pick up which is likely to boost international travel.
But Taylor Wimpey (LON:TW) fell 1.1% as JP Morgan placed the housebuilder on negative catalyst watch following the sector’s strong performance. The US bank has a neutral rating on the stock.
Entain rises after strong start to 2023
Entain PLC (LON:ENT) rose 2.5% after its first quarter update. The owner of Ladbrokes (LON:LCL) said it had made a "strong start" to 2023.
Analysts at Jefferies said it was a "robust" performance, despite tough comparatives, and bodes well for achieving full-year guidance and market estimates.
The gambling firm reported a strong start to 2023 with first quarter group net gaming revenue (NGR) up 15% and up 17% including the 50% share of BetMGM.
Online NGR rose 16%, in line with expectations and demonstrating strong momentum, while retail NGR was 14% higher.
Entain said its US joint venture BetMGM continues to grow strongly with quarter one NGR of around US$470mln, up 76%, delivering in line with guidance of US$1.8-US$2.0bn for 2023.
"We are delivering both financially and strategically, with a record number of active customers enjoying our products, and we are executing on growth opportunities to further diversify and expand across regulated markets," said CEO Jette Nygaard-Andersen.
Reiterating its buy rating Jefferies said it sees valuation support, and likely speculative share price action as the six-month window until a possible MGM return expires (early August).
Matt Britzman, equity analyst at Hargreaves Lansdown (LON:HRGV) said: “The cost-of-living crisis can’t deter punters from enjoying a flutter across Entain’s suit of brands, including Ladbrokes and partypoker to name a couple. First quarter performance was strong, albeit mainly in line with market expectations, with active customer numbers reaching record levels.”
“BetMGM, the US joint venture, continues to perform well and remains on track to deliver positive cash profit in the second half of this year,” he added.
He also pointed out that despite the looming, but much delayed, White Paper on the gambling industry Entain’s global presence makes it less exposed to potential issues than more UK-focused peers.”
FTSE 100 pushes higher
The FTSE 100 climbed in early exchanges on Tuesday after US markets closed off earlier lows and China’s economy grew at a faster rate than expected.
At 8.15am London’s lead index stood at 7,903.42, up 23.91 points, or 0.30%, while the FTSE 250 was trading at 19,338.24, up 51.34 points, or 0.27%.
In London, the UK unemployment rate edged higher while pay growth climbed to 6.6% in the three months to February, official figures data showed.
The number of people out of work rose to 3.8% between December and February, up 0.1 percentage point, according to figures from the Office for National Statistics.
Growth in average total pay (including bonuses) was 5.9% and growth in regular pay (excluding bonuses) was 6.6% among employees in December to February. This was an increase on the 6.5% rise in the three months to January.
Samuel Tombs at Pantheon Macroeconomics said suggested the labour market is “not nearly as hot” as the employment figures imply.
Brisk growth in employment in the three months to February was driven by a 134,000 rise in self-employment; employee numbers rose by a mere 18,000.
He also felt the upward revision to the wage data has raised the chances of the MPC hiking Bank Rate again next month; a further 25bp now looks like a “toss-up,” with the odds likely to shift decisively tomorrow after the publication of March’s consumer prices report.
In company news, easyJet soared around 4% after forecasting full year profit ahead of current City expectations of £260mln reflecting the current high levels of bookings and strong demand heading into the Summer.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “The usual seasonality means easyJet expects to deliver a headline loss for the half, but there are real signs the airline is beginning to turn a corner. “
“Taking more of a ‘Ryanair (LON:RYA) approach’ to routes, baggage allowances, and staff shifts has helped to protect yields and margins, and the airline is well hedged in terms of fuel costs,” he suggested.
“easyJet should be on track to build up around 40p of earnings per share over the next 12 months or so, which would make the company’s shares appear on the cheap side relative to the rest of the market,” he reckoned.
Entain PLC was another stock on the leaderboard with shares up 3%.
The gambling firm reported a strong start to 2023 with first quarter group net gaming revenue (NGR) up 15% and up 17% including the 50% share of BetMGM.
Online NGR rose 16%, in line with expectations and demonstrating strong momentum, while retail NGR was 14% higher.
Entain said its US jv BetMGM continues to grow strongly with quarter one NGR of around US$470mln, up +76%, delivering in line with guidance of US$1.8-US$2.0bn for 2023.
GSK plc (LON:GSK) was little changed after its £1.6bn swoop for Canada’s Bellus Health but THG (LON:THG) tumbled 16% after it reported revenue rose up 2.7% year-on-year to £2.24bn but pre-tax loss widened to £549.7mln from £186.3mln.
The move downwards followed a sharp rise yesterday after the firm said it had received a preliminary bid approach.