FTSE up 20 points
Miners retreat on higher costs and lower demand
Haleon leads fallers on second trading day
After the pound rebounded against the dollar on Monday, the upturn continued into Tuesday afternoon, with the sterling up 0.6% to 1.2015 against the American currency.
Many analysts attributed this reverse to the dollar’s strong rally in recent weeks, which has seen the pound lose significant parts of its value.
ING Economics commented: “We still estimate that the pound will remain, by and large, untouched by political developments over the coming days, while data should have a larger impact.
“If markets see more reasons to fully price in a 50bp rate hike in August, we could see some benefit for the pound, but GBP/USD is set to remain mostly driven by external factors and dollar dynamics.”
Although it wasn’t all rosy for the sterling, which declined against the euro.
Pound sterling declined 0.5% against the euro to €1.1722 on speculation the European Central Bank (ECB) may raise the eurozone’s interest rate by 50 basis points, or 0.5 percentage points, following its hawkish report.
The ECB will likely be forced to issue its first rate hike since 2011 amid worsening inflation in Europe.
The rumoured bigger-than-expected rise boosted the euro’s price against other major currencies on Tuesday afternoon.
Although Katharine Neiss, chief European economist at PGIM Fixed Income, said: “The European Central Bank has told us rates will rise by 25bps and it would be a surprise if it did not deliver on this guidance.
“Inflation expectations are no longer de-anchored on the downside and headline inflation remains high, suggesting some normalisation in rates is warranted.”
12.50pm: Informa leads Footsie
Informa PLC (LSE:INF) led the blue-chip risers on Tuesday afternoon, up 5.1% to 564.6p, after announcing the return of its dividend and revealing a £324mln deal to purchase American business news publisher Industry Dive.
British events organiser insisted the acquisition would strengthen its business-to-business (B2B) digital services.
"Industry Dive ... has repurposed the traditional B2B publishing model for specialist markets in the digital age," Stephen Carter, Informa chief executive, commented.
The hospitality and events industry has been recovering from pandemic-related setbacks this year with several recent transactions and deals.
In February, Informa sold 85% of its Pharma Intelligence division to Warburg Pincus for £1.7bn.
Meanwhile, Euromoney agreed this week to a £1.6bn takeover by Astorg Asset Management and Epiris, while Future bought brands from Dennis Publishing for £300mln in 2021.
Informa also reiterated its full-year outlook is at the top end of its range following strong demand and said it expects to announce a 3p per share dividend with its upcoming interim results.
12.00pm: Miners fall on higher costs and slumping demand
BHP Group and Rio Tinto (LON:RIO), two of the world’s largest miners, have recently warned of turbulent times ahead for commodities producers on soaring costs and deteriorating demand.
BHP said Tuesday an “overall slowing of global growth” due to Russia’s invasion of Ukraine, the energy crisis and global interest rate hikes were the causes of concern.
The Melbourne-based multinational mining company saw its shares drop 1.5% to 2,102.5p, while Rio Tinto, who made similar comments last week, declined 0.1% to 4,707.4p.
BHP also issued a warning that cost pressures would continue amid worldwide fears of recessions and waning demand in China for commodities.
"We expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints," Mike Henry, BHP chief executive, commented.
11.08am: Santander (BME:SAN) UK offers most workers 4% pay rise
Santander said it would award the majority of its UK-based employees a 4% pay rise to help alleviate the worsening cost-of-living crisis.
Although the pay hike still represents a significant reduction in real wages as May inflation reached a 40-year high of 9.1%.
Any employees on less than £35,000 annually will reportedly be eligible for the rise, which is 60%, or 11,000, of UK workers.
"This 4% pay raise will make a real difference to the majority of our customer facing and contact centre staff who are committed to helping our customers and businesses prosper in the current economic climate," Mike Regnier, chief executive, said in a statement.
The Spanish bank also confirmed it would raise its entry-level salaries to £19,500 from the start of next month.
It joins a parade of lenders including Barclays (LON:BARC), Lloyds Banking Group (LON:LLOY) and NatWest (LON:NWG) that have unveiled similar pay increases for lower-paid staff.
10.18am: Annual grocery bills up £450
Annual grocery bills rose by £454, while supermarket price inflation reached its second highest level on record in early July, according to industry data by Kantar Worldpanel.
UK's two leading supermarkets Tesco PLC (LSE:LON:TSCO) and J Sainsbury (OTC:JSAIY) PLC were relatively unchanged on the news, up 0.1% and 0.3% to 260.3p and 215.9p respectively.
As the cost of thousands of everyday products was monitored, Kantar showed that price inflation surged to 9.9% at the start of the month – the second biggest figure since records began in 2008.
"Grocery prices continue to soar to near record-breaking heights and have jumped by another 1.6 percentage points since last month," Fraser McKevitt, head of retail and consumer insight at Kantar, commented.
McKevitt added that unprecedented grocery price inflation was likely to be seen in August, as there were very few signs of a slowdown in the pace of price hikes.
Supply chain issues have continued, which coupled with sky-high energy and fuel prices has kept driving the industry’s costs and prices up further.
Milk, butter and dog food saw the greatest hikes, Kantar reported.
Unsurprisingly, these rocketing prices forced many shoppers to give German discounters, Aldi and Lidl, a go.
An extra 1.4mln people visited them over the past 12 weeks, with own line supermarket sales growing 4.1% compared with a 2.4% reduction in branded items.
9.29am: Public sector workers await £100bn pay deal plan
On Tuesday, the UK government will unveil this year’s pay deal for 2.5mln public sector employees, which will cover approximately £100bn in salaries.
Doctors, nurses, teachers, police officers, dentists, armed forces members, non-medical NHS staff, prison officers, senior civil servants and the judiciary will all be covered.
Trade unions have been pushing for wage rises to exceed the 40-year high inflation and reflect the cost of living, while ministers have insisted such high hikes would only exacerbate rising prices further.
Earlier this morning, figures from the Office for National Statistics showed pay growth of 7.2% in the private sector compared with 1.5% in the public sector.
The average public sector pay increase is anticipated to be roughly 5%, which compares to inflation lately at 9.1% and expected to grow as high as 11% by October, according to the Bank of England.
Patrick Roach, general secretary of the NASUWT teachers' union, commented: "If the government hopes that teachers' anger will dissipate over the course of the summer break, they are wrong.
"A pay award that is below inflation will be yet another pay cut for hardworking teachers."
8.32am: Tech, travel and miners fall
The FTSE 100 opened lower on Tuesday after UK jobs numbers that maybe muddied the waters over the Bank of England's next interest rate move.
London's blue-chip share index sank 30 points, or 0.4%, to just over 7193 in early trading, following the decline on Wall Street overnight.
Tech stocks, travel and leisure, and miners were notable fallers, including Ocado Group PLC (LSE:LON:OCDO) (down 2.9%), AVEVA Group PLC (down 2.5%), IAG (LON:ICAG) (down 2.3%) and Flutter Entertainment PLC (LSE:FLTR) (down 2.1%).
Debutant Haleon PLC (LSE:HLN, NYSE:HLN) continued its decline after being spun out of GSK PLC (LSE:GSK, NYSE:GSK), down another 1% to take its decline to almost 10% since its debut yesterday.
Top of the leaderboard was events group Informa PLC (LSE:INF), up 4% after it provided an update showing its new growth acceleration plan II is "delivering further momentum", allowing it to confirm full-year targets.
“The positive start to the week turned out to be nothing more than another bear market rally, as some cautious company outlook comments took the wind out of investors’ sails," said Richard Hunter, head of markets at Interactive Investor.
He said the cat has been put among the pigeons following a report that Apple Inc (NASDAQ:NASDAQ:AAPL) plans to pull back hiring and growth spending next year in anticipation of the possible economic downturn.
"Quite apart from the company’s influence given its size – its market value is currently over $2.4 trillion – it is also seen as a strong indicator of consumer spending intentions," said Hunter.
The news sent its shares down by over 2% midway through the US session, but equally importantly. said Hunter, "provided another stark reminder of the fact that corporates could be feeling the squeeze against a backdrop of high inflation and tightening margins."
7.52am: Jobs market tightens (or loosens?)
UK employment picked up strongly in May but wages continued to drag their heels well behind the rate of inflation.
Employment was 296,000 higher in the three months to May than in the previous three months, according to figures from the Office for National Statistics, which was much stronger than the 170,000 expected, though the headline unemployment rate held steady at 3.8%.
Weekly earnings growth excluding bonuses nudged up to 4.3% from 4.2%, as expected, while growth in average weekly earnings, including bonuses, decreased to 6.2% in May, from 6.8% in April, which was lower than the consensus forecast.
Payroll employee numbers in June were estimated to have increased by 31K (0.1%) month-to-month in June, below the consensus, 68K.
The pick-up in wage growth "will add a bit more pressure on the Bank of England to raise interest rates by 50 basis points rather than the 25 basis points at the next policy meeting in August", said economist Ruth Gregory at Capital Economics.
With the rise in employment "suggests the weakening in GDP growth during Q1 has yet to weigh on jobs growth" and "by any metric the labour market is still very tight", she added.
Offering an alternative view, Sam Tombs at Pantheon Macroeconomics said: "The labour market no longer is tightening, easing the pressure on the MPC to step up the pace of its rate hiking cycle. Labour supply is starting to rebound, now that the adverse impact of the pandemic on domestic participation and on immigration is fading."
6.50am: Starting lower
The FTSE 100 is seen slightly lower ahead of Tuesday’s open as investor sentiments remain subdued.
CFD firm IG Markets has the London benchmark some 30 points lower with just over an hour to go until the open, making a price of 7,187 to 7,190.
It picks up from an upbeat opening session for the week, though the momentum proved hard to hold onto.
“Even though sentiment was more buoyant, with US markets also rebounding strongly, there was always that nagging doubt that any rebound was always one negative headline away from coming unstuck, as is so often the case when you get bear market rallies,” said CMC Markets analyst Michael Hewson.
“This caution turned out to be justified, as soon after Europe had closed, it was being reported that Apple was planning to slow hiring and spending heading into 2023 in a number of key areas. This followed on from a similar decision by Google owner Alphabet (NASDAQ:GOOGL) last week to do something similar with respect to hiring in the latter part of this year and into 2023.
“These reports prompted US markets to slide back and close lower on the day, highlighting once again how fragile sentiment currently is ahead of next week, when we’ll get to hear the holy trinity of big tech announce their latest quarterly numbers, with Alphabet, Amazon (NASDAQ:AMZN), Apple, Microsoft (NASDAQ:MSFT) and Meta all updating the markets.”
On Wall Street, the Dow Jones lost 215 points or 0.69% to close Monday at 31,072.
The S&P 500 at the same time slipped 0.84% lower to 3,830 and the Nasdaq fell 0.81% to finish the day at 11,360.
America’s small-cap Russell 2000 index meanwhile fared better, losing a mere 0.34% to 1,738.
In Asia, Japan’s Nikkei rallied 183 points or 0.68% to 26,969 whilst Hong Kong’s Hang Seng moved the other way, down 0.91% to 20,656, and the Shanghai Composite dipped 0.35% lower to 3,266.
Around the markets
The pound: US$1.1961, up 0.08%
Gold: US$1,710 per ounce, up 0.08%
Silver: US$18.74 per ounce, up 0.08%
Brent crude: US$105.93 per barrel, up 4.7%
WTI crude: US$102.28 per barrel, up 4.6%
Bitcoin: US$22,062, up 0.86%
Ethereum: US$1,536, up 1.4%