FTSE 100 flat but BAE Systems climbs after update, while UK jobless rate and wages edge higher

FTSE 100 flat but BAE Systems climbs after update, while UK jobless rate and wages edge higher

Proactive Investors - BAE Systems (LON:BAES) PLC (LSE:BA.) is bucking the downward trend, up 2.3% after an upbeat trading statement.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown (LON:HRGV), said: “There are a few things that BAE is beholden to, and one of those is government defence budgets. We’ve learned today that many of the countries the defence giant operates in are upping their defence spending in response to the more threating geopolitical climate. This should feed into a sticky source of revenue for the group. New government contracts tend to be long-term in nature, giving BAE exceptional visibility over demand, which is hard to find in today’s uncertain environment. Since the half year the defence group has seen £10bn of order intakes and profits on a constant currency are expected to come in in-line with expectations.

"The group is still grappling with supply chain issues, especially in areas of the business that rely on microelectronics. For now, BAE is able to offset the worst of these issues, operating in a sector with high barriers to entry means margins can enjoy a certain level of protection. However, an extremely protracted bout of disruption could cause pain."

Utility shares are also providing some support to the market, with British Gas owner Centrica PLC (LSE:LON:CNA) climbing 2.8% as it started a £250mln buyback programme, SSE PLC (LSE:LON:SSE) up 2.02% and National Grid PLC (LSE:LON:NG.) 1.14% higher.

But overall the FTSE 100 remains marginally lower, off 1.65 points at 7383.52.

8.14am: Footsie struggles for direction in early trading

Leading shares have opened virtually unchanged following news that the UK unemployment rate was higher than expected, while wages also beat forecasts but still lag behind inflation.

With a late turnaround on Wall Street and despite a positive session in Asia, the FTSE 100 is down just 0.66 points at 7384.51, shrugging off a number of disappointing results.

Vodafone Group PLC (LSE:LON:VOD) has fallen 4.12% after the telecoms firm lowered its full year earnings forecast and announced plans for a further €1bn of cost savings by 2026.

It warned the worsening global macroeconomic climate, rising energy costs and increased inflation had hit financial performance.

Imperial Brands PLC (LSE:LON:IMB) and Land Securities Group PLC (LSE:LAND) were also lower after their latest updates, down 1.18% and 1.06% respectively.

7.49am: Sterling gains on the dollar while euro surges

This morning’s price action provides more fuel to the thesis of a dollar top.

While the US Dollar Index (DYX) did end up marginally higher by the end of yesterday’s session, the index has stayed within the 106 - 106.7 range for the past three days.

Market indecision is demonstrated by the spinning top candlestick patterns formed on the daily chart; a third today would act as further confirmation of a rangebound dollar stuck at three-month lows.

Recent chat performance suggests indecisive DYX sentiment – Source: capital.com

Today’s UK unemployment data came in a tad higher than expected, by edging up to 3.6% in the three months to September of 2022 from 3.5% in the previous period, with average earnings up 6% year on year- still way below an inflation rate that’s predicted to hit 10.5% in tomorrow’s reading.

GBP/USD is up more than 50 pips to US$1.18, with most gains added in the hour since the unemployment data release.

Can Cable extend past August highs? – Source: capital.com

EUR/GBP is changing hands at 87.8p, with the euro gaining the upper hand given the past three days of solid gains on the pair

Monday’s Euro Area industrial production reading came as a surprise, having advanced 4.9% from a year earlier in September 2022, easily beating the 3.3% forecast.

While that did little to stir momentum in the euro yesterday, the EUR/USD pair is definitely rallying today. Having added 0.6% so far, the pair has cleared a four-month high of US$1.038.

Euro area GDP figures due this morning are expected to be grim; we’ll see if that pours cold water on the euro’s bullish performance.

7.34am: Unemployment rate up to 3.6%, wage growth edges higher

Ahead of UK inflation figures tomorrow and the Autumn Statement on Thursday, UK unemployment has come in slightly higher than expected, according to government figures.

The jobless rate rose from 3.5% in the three months to August to 3.6% in the quarter to September, the Office for National Statistics reported, when an unchanged figure had been forecast.

Headline indicators for the UK labour market for July to September 2022 show that:

▪️ employment was 75.5%

▪️ unemployment was 3.6%

▪️ economic inactivity was 21.6%

➡️ https://t.co/QM92jLpXGf pic.twitter.com/TNSFFUG1w6

— Office for National Statistics (ONS) (@ONS) November 15, 2022

Wage growth was also higher than expected, with average weekly earnings excluding bonuses rising an annual rate of 5.7%, up from 5.4%. Analysts had pencilled in a rise of 5.5%.

Including bonuses it rose by 6%, the biggest rise outside the pandemic period.

But it still remains well below the annual inflation rate of 10.1%, which is itself expected to rise to 10.5% in tomorrow's report.

Taking into account inflation, average pay including bonuses fell by 2.6%.

The number of people not working or looking for work rose by 0.2 percentage points to 9mln. Around 21.6% were classed as economically inactive, up from 20.2% in the previous quarter.

The ONS said the increase in economic inactivity was driven by those who are long-term sick, who increased to a record high.

In August to October 2022, the estimated number of vacancies fell by 46,000 on the quarter to 1,225,000. Despite four consecutive quarterly falls, the number of vacancies remain at historically high levels. An increasing number of businesses are now reporting holding back recruitment because of economic pressures.

7.00am: FTSE seen slightly lower

FTSE 100 expected to open slightly lower following late falls in the US and after China reported slower-than-expected growth in factory output and retail sales for October, as a surge in Covid cases and a deepening property slump weighed on the world's second largest economy.

Spread betting companies are calling London’s blue-chip index down by around 7 points.

US markets tumbled in late trading to end the day in negative territory, giving up some of last week’s strong gains, as another tech giant was reported to be set to announce swathing job cuts.

At the close the Dow Jones Industrial Average was down 211 points, or 0.63%, at 33,537, the S&P 500 fell 36 points, or 0.89%, to 3,957 and the Nasdaq Composite dropped 127 points, or 1.1%, to 11,196.

Shares in tech giant, Amazon.com Inc (NASDAQ:NASDAQ:AMZN). dropped 2% as The New York Times reported it was set to axe 10,000 jobs becoming the latest tech giant to cull its workforce.

A busy day of corporate and economic news will kick off with unemployment and average earnings data while results are due from Imperial Brands PLC (LSE:IMB), Land Securities Group PLC (LSE:LAND) Wincanton PLC (LSE:WIN), Vodafone Group PLC (LSE:VOD) amongst others while BAE Systems PLC (LSE:BA.) is due to give a trading update.

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