- FTSE 100 higher in early trading
- Real terms pay falls by a record 3% in the UK
- BHP rises after reporting record profits
Shares in London made steady progress on Tuesday, boosted by strong results from Anglo Australian mining group, BHP, which drove others in the sector higher.
A late rally by US stocks overnight also provided support and offset concerns following data in the UK today which showed a record fall in real terms pay according to the Office for National Statistics.
At 8.50am the blue chip index was trading 17.71 points higher at 7,526.86 while the broader FTSE 250 index was 14.35 points to the good at 20,397.11.
Danni Hewson, AJ Bell financial analyst said: “Another month, another chance for inflation to nibble away at the nation’s pay-packets.”
“Whilst wages are rising, they’re no match for red hot prices and in real terms people’s regular pay fell by 3% in the three months between April and June.”
“But there are signs the labour market is loosening up.”
“Vacancies actually fell over the last quarter for the first time since mid-2020 when the first lockdown ended, and life surged back to some kind of normal.”
“Where last month there were more job openings than unemployed people waiting to take them, the number has now equalized.”
BHP Group Limited shares surged 3.84% to 2,323p after posting record profits.
Victoria Scholar, head of investment at interactive investor said “BHP has been a key beneficiary of the surge in commodity prices this year.”
“Coal hit record highs this year following Russia’s invasion of Ukraine.”
“It looks like BHP is keen to deploy its $4bn of cash as it seeks out effective M&A opportunities in the sector.”
“Another higher offer for OZ Minerals, after its first bid was rejected, looks as though it could be on the cards.”
“Looking ahead, the environment looks increasingly challenging with copper prices down 25% since the March high and with concerns about rising global interest rates, labour constraints and an economic slowdown in China.” Scholar concluded.
Ted Baker (LON:TED) surged 16.6% after Juicy Couture and Forever 21 owner Authentic Brands agreed to buy the company in a deal worth roughly £211mln.
8.25am FTSE 100 ticks higher
FTSE 100 opened higher on Tuesday following late rallies by US stocks overnight, strength in mining stocks following record profits from Anglo Australian mining group, BHP, and as investors digested the latest UK jobs and wages growth data.
At 8.20am the blue chip index was trading 30.91 points higher at 7,540.06.
Richard Hunter, head of markets at interactive investor, commented: “amid signs of a flagging Chinese economy, US markets staged a late comeback to record another session of gains.”
“The FTSE100 again showed its mettle in the face of an uncertain economic outlook at home and abroad, and ticked higher in early exchanges to stand ahead by 2% in the year to date.”
“The index has become relatively fashionable in this challenging inflationary environment and remains underpinned by valuations which are still undemanding in relative terms to many global peers.”
“Miners forged ahead as a read across from some strong BHP numbers emanating from Australia, while an acquisition announcement from GlaxoSmithKline kept the pharmaceutical momentum going following the previous positive drug news from AstraZeneca (NASDAQ:AZN).”
Shares in BHP Group Limited surged 3.91% after the mining group posted its highest ever full-year profit on record commodity prices, and said it will push ahead with growth options on a stronger demand outlook in China.
Underlying EBITDA rose 16% to $40,364mln with underlying earnings per share up 25% to 421.2c.
The results drove others in the sector higher, Rio Tinto PLC (LSE:LON:RIO) (up 1.85%), Glencore PLC (LSE:LON:GLEN) (up 1.66%) and Anglo American (LON:AAL) (up 1.43%).
GSK PLC (LSE:GSK, NYSE:GSK) rose 1.22% after completing the acquisition of Affinivax, a clinical-stage biopharmaceutical company based in Cambridge (Boston, Massachusetts).
7.55am: Jobs, wages growth data in focus
Commentating on today's UK jobs and wages figures Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: “The headline rate of year-over-year growth in average weekly earnings, including bonuses, decreased to 5.1% in June, from 6.4% in May, but exceeded the consensus, 4.5%, while the headline rate excluding bonuses increased to 4.7%, from 4.4%, and also exceeded the consensus, 4.5%."
“For now, wage growth has more momentum than the MPC can tolerate” he said, although he did point out that timelier data suggests that wage growth is more likely to cool than rise further.
He noted that the PAYE measure of median pay merely held steady in July, while the Bank of England’s Decision Maker Panel survey showed that businesses expected in July that year-over-year growth in wages will be 0.3 percentage points lower over the next year than over the last 12 months.
With regard to the unemployment numbers Tombs said indicators suggest that it will start to rise far sooner than the Bank of England anticipates with a fall in job vacancies of 0.7% reflecting the deterioration in timelier measures of vacancies from Adzuna and LinkedIn, as well as the recent sharp fall in the permanent staff placements balance of the REC Report on Jobs survey.
On balance Tombs said he thinks "today’s labour market data still leaves the door open to the MPC pivoting back to a 25bp hike in bank rate at its next meeting."
7.30am: Gains seen in London
Shares in London are expected to make a bright start to trading on Tuesday following gains in the US overnight, strong results from BHP and as investors digested the latest UK unemployment and wage growth data.
Spread betting companies are calling the lead index up by 26 points.
The latest data from the Office for National Statistics (ONS) showed that growth in average total pay (including bonuses) was 5.1%, slightly better than expected, although growth in regular pay (excluding bonuses) was 4.7%, above forecast, among employees in April to June 2022.
But the squeeze on consumers was highlighted by a record fall in real terms regular pay, 3%, between April to June, the ONS said.
The unemployment rate edged higher to 3.8% between April to June, up 0.1 percentage points from the previous three month period, while the UK employment rate was estimated at 75.5%, which is 0.1 percentage points lower than the previous three-month period.
BHP Group, the world’s biggest miner, posted its highest ever full-year profit on record commodity prices, and will push ahead with growth options on a stronger demand outlook in China.
Underlying EBITDA rose 16% to $40,364mln with underlying earnings per share up 25% to 421.2c.
The producer will study plans to expand its top-earning iron ore unit to 330mln tonnes of production a year, and is continuing to assess options to lift volumes in copper and nickel.
A giant new potash mine in Canada remains on track to begin in 2026.
Chief Executive Officer Mike Henry said China’s emergence from the Covid-19 lockdowns would provide a “tailwind” to the global economy, in a counterpoint to jittery sentiment on China following a swath of surprisingly weak data.
“We think that over the next 6-12 months, China, if anything, is going to provide some stability to global growth and will help offset some of the slowing that we see elsewhere,” Henry said.
China typically accounts for more than 60% of BHP’s revenue.
6.55am: FTSE 100 seen higher, jobs data in focus
FTSE 100 seen opening higher on Tuesday following gains in the US overnight but with one eye on the latest UK jobs figures.
Spread betting companies are calling the lead index up by 23 points.
The Dow closed Monday up 152 points, 0.5%, at 33,913, the Nasdaq Composite added 81 points, 0.6%, to 13,128 and the S&P 500 improved 17 points, 0.4%, to 4,297.
In London, Tuesday brings the UK’s latest jobs figures, with wage growth again the key number to watch.
Wage growth reached 6.2% in May, or 4.3% excluding bonuses, and is forecast to ease to 5.2% and 4.4% respectively in June.
As consumer price inflation in June surged to its highest level in 40 years of 9.4%, this means real wages will have continued to fall
Unemployment is seen remaining at 3.8% for the three months to June. In May job vacancies stood at 1.3mln and the employment rate was 75.9%, a fraction below the pre-pandemic peaks.
Results are also due from BHP.