Proactive Investors -
- FTSE 100 adds 80 points
- UK wage growth easing raises BoE cut hopes
- Persimmon (LON:PSN) profits more than halved
The FTSE is continuing to charge higher, though the assistance from the pound is fading away, with the index up above 7750 for the first time since the 2nd of January.
Financials are prominent in the top risers, with banks Barclays (LON:BARC), Lloyds (LON:LLOY) and NatWest (LON:NWG) in among them, the Prudential (LON:PRU) is top of the list, up 4%.
“Interestingly, nearly all sectors were in positive territory, implying that investors were feeling upbeat across the board which is a healthy situation to have in markets," says Russ Mould, investment director at AJ Bell.
He adds that investor sentiment is being boosted by the UK wage data, "which raises the chances of the Bank of England cutting interest rates sooner rather than later".
"However, imminent US inflation data could easily turn markets on their head if it looks like the cost-of-living pressures are here to stay for a while longer, and that the Fed won’t be cutting rates in the near term."
Casting a glance at bitcoin, the rally seems to have lost steam, pulling back to $71,700 this morning, but we will see what happens when America wakes up.
Mouls says "perhaps indicating that some investors are banking profits while the going is good".
FTSE leads European charge as pound slips
The FTSE 100's 68-point rise to 7737 so far this morning means it is leading the European charge.
London's index is up 0.89%, while Germany's DAX has risen 0.33%, France's CAC 0.14% and Spain's IBEX 0.53%
China-sensitive stocks like Prudential, Standard Chartered (LON:STAN) and HSBC (LON:HSBA) are leading the FTSE amid reports that Beijing is under pressure to provide some extra economic stimulus.
Market analyst Victoria Scholar at Interactive Investor says the big focus for markets today is the US CPI inflation reading later, which is expected to remain at 3.1% for February, while the monthly figure is seen ticking up to 0.4% versus 0.3% in January.
Francesco Pesole at ING said: "The dollar has found a bit of support into today’s US CPI data, which we expect to show a still too-hot 0.3% MoM core rate for February.
"If we are right with our 0.3% call, we may not see a big market impact already today, but it could definitely set the tone for a more defensive stance on FX – i.e., a gradual rotation back to the dollar – ahead of next week’s FOMC meeting."
Pet medicines probe hits vet group
Vet group CVS Group (AIM:CVSG) and pet store chain Pets at Home Group PLC (LON:PETSP) (LSE:PETS) are both down, 17.5% and 2.5% respective, after the Competition and Markets Authority warned that pet owners may be paying too much for their animals' drugs.
The CMA said it is launching a formal market investigation as pet owners are not being given enough information on pricing for both medicines and treatment, meaning they are often left overpaying for medicines.
“We have heard concerns from those working in the sector about the pressures they face, including acute staff shortages, and the impact this has on individuals,” CMA boss Sarah Cardell said. “But, our review has identified multiple concerns with the market that we think should be investigated further.”
Domino's Pizza Group (LON:DOM) PLC is another faller, down 8.5% after reporting that first-quarter sales would likely be lower than a year ago.
The update came alongside full-year numbers for last year that were largely in line with expectations, as well as news of a £62 million acquisition in Ireland.
Top of the FTSE 250 leaderboard is TP ICAP (LON:NXGN) PLC (LSE:TCAP), up 10.7% after it announced its highest-ever profits and launched a new share buyback programme, starting today, of £30 million.
It also said it is mulling a separate listing for its data arm, Parameta Solutions.
Earlier rate cut being priced in
Financial markets are now repricing expectations of when the Bank of England will make its first rate cut, after the ONS labour market report earlier showed softening in several areas, including weaker wage growth.
"This has caused traders to reassess their bet that the Bank of England will delay cutting rates until August, and there are growing expectations that the first BOE rate cut will come in June, and that there will be three cuts from the Bank this year," says market analyst Kathleen Brooks at XTB.
"As the market recalibrates its expectation for the first BOE rate cut from August to June, sterling is coming under downward pressure," she added.
The pound, which has been the best performing currency in the G10 so far in 2024, has slipped from $1.282 before the ONS report down to $1.278 on the back of the data.
"The dollar is staging a comeback this week, which is also weighing on the pound. Gilt yields are also lower, which may add pressure on sterling in the short to medium term," Brooks added.
UK rate expectations are moving this morning, after the labour market data was softer than expected and wage growth was weaker. The market is almost pricing in a June rate cut, previously this was August. pic.twitter.com/Ycticpsq9o— kathleen brooks (@KATHLEENBROOKS) March 12, 2024
Bitcoin to the moon?
UK blue-chip shares are up and bitcoin (which was the talk of the pub after football last night) is maintaining the record highs reached yesterday.
Against the dollar, bitcoin is up just under 4% over the past 24 hours to $72,430.12.
Some financial market analysts are saying it could go much higher too.
“The massive inflows that have been allowed by the introduction of spot exchange-traded funds (ETFs) and the upcoming halving are fueling the actual rally in bitcoin,” says analyst Ipek Ozkardeskaya at Swissquote Bank in our daily crypto report.
“The bulls are eyeing the US$100,000 mark, I believe we will get there.”
It would appear that there were 500M of inflows yesterday. I checked before all numbers were updated.Also, funding resets for 11bps to 5bps on bitcoin.
It would seem the market might not give dips before higher. Unless you consider 1-2k dip sufficient, might not give more. pic.twitter.com/0PXk6qT77v
— SalsaTekila (@SalsaTekila) March 12, 2024
FTSE off to a flyer
The FTSE 100 has got off to a good start, rising 54 points or 0.7% to 7723 in early trading after the softer UK wage figures raised hopes of interest rate cuts.
Sterling fell 0.23% against the dollar after the ONS report showed wage growth eased in the three months to January and employment levels fell.
Only three blue chips are in the red, led by Persimmon PLC (LSE:PSN), down 3.5% on the back of its results, where profits fell 52% but the dividend was maintained.
The housebuilder said it expects market conditions to “remain subdued throughout 2024”, with interest rates seen remaining around current levels and with a general election looming.
British Gas owner Centrica (LON:CNA) is down 0.65% and National Grid (LON:NG) just 0.05% lower, which seems to be linked to the announcements from the government about new gas power stations.
Top of the leaderboard were financial sector names, though all with a large Chinese focus, Prudential, Standard Chartered and HSBC.
Government backs gas power
Downing Street says Britain needs to build new gas-fired power stations to ensure the country's energy security.
Prime Minister Rishi Sunak said new stations will replace aging current plants in a newspaper column ahead of an announcement from energy secretary Claire Coutinho later.
Sunak said the CO2 produced will not be captured, which climate groups said could threaten the government's legally binding net zero commitments.
Coutinho is expected to set out her gas strategy at a speech at the thinktank Chatham House later.
“Without gas backing up renewables, we face the genuine prospect of blackouts. Other countries in recent years have been so threatened by supply constraints that they have been forced back to coal,” she will say, according to copies of the speech leaked to newspapers.
Sunak's column in the Daily Telegraph said gas power was needed to provide power for days when wind and solar did not deliver enough.
"It is the insurance policy Britain needs to protect our energy security, while we deliver our net zero transition," he said.
Persimmon profits plunge, divi maintained
Results from FTSE 100 housebuilder Persimmon PLC (LSE:PSN) could be read different ways, with profits for last year more than halving to £351.8 million and the company expecting another tough year in 2024.
But for income investors, the company maintained its dividend at 60p and committed to keeping it at least at this level.
This is despite cash more than halving to £420.1 million and the balance sheet expected to transition from an average net cash to an average net debt position by the end of the year.
Chief executive Dean Finch said: “Although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged.”
He said the company is “well placed” to meet demand with houses offering different price ranges below the market average, with completions expected to increase to between 10,000 and 10,500 for 2024.
Jobs analysis
In one line, Pantheon Macroeconomics's new signing Rob Wood says the ONS report adds to interest rate cut hopes as the "downside wage growth surprise will raise MPC confidence that inflation pressures are fading".
"Official labour market data suggest a loosening labour market and continued weaker wage momentum," said Wood, adding that "all parts of the employment report today surprised on the downside".
However, he said the dip in the unemployment rate from its post-Covid peak of 4.3% in July to 3.8% in December "looks particularly suspect, so we would take today’s uptick in the unemployment rate to 3.9% as some correction of that odd previous trend".
Paul Dales at Capital Economics said: "The easing in wage growth in January is probably still a bit too slow for the Bank of England’s liking. But there are encouraging signs that a more marked slowdown is just around the corner and that an interest rate cut in June is possible."
The fall in the number of job vacancies from 928,000 in the three months to January to a 32-month low of 908,000 in the three months to February "suggests the labour market continues to loosen more than the unemployment rate is letting on", Dales said, adding that this was consistent with wage growth slowing to 4-5% and February’s REC survey points to wage growth of 3% in 6-9 months’ time.
"And as long as the average 0.3% m/m rise in earnings in the past six months, (down from 0.7% m/m in the previous six months) continues, actual wage growth will fall more markedly in the coming months. That, alongside a fall in CPI inflation below the 2% target in April, could be enough to prompt a rate cut in the summer."
Strong FTSE start anticipated, UK wage growth eases
The FTSE 100 is anticipated to get off to a strong start on Tuesday after official UK job numbers came in softer than expected.
London's blue-chip equity benchmark is seen rising just over 70 points on spread-betting platforms, having scraped a positive result the previous day, up 9.49 points at the close to reach 7,669.23.
The UK unemployment rate unexpectedly rose to 3.9% in the three months to January, according to new figures from the Office for National Statistics, from 3.8% before, where economists had expected it to remain.
Average weekly earnings in the period were up 5.6% on the same period a year ago, down more than expected from the 5.8% a month ago, with the consensus forecast pointing to 5.7%.
Excluding bonuses, pay was up 6.1%, down from 6.2% as expected.
Employment levels in the three month period were down 21,000 on the preceding three months, while forecasts had expected a small increase.
More timely figures from February showed the job claimant count rate remained at 4.0%, with a 16,800 increase in jobless claims and payrolled employees up 20,000 on the prior month, compared to a consensus forecast of 25,000.
⚠️ Softer-than-expected UK jobs report in line with some of the alt labor market data (pay growth missed, weak jobs growth, higher u/e & jobless claims). But key is there's pipeline wage disinflation coming with PAYE data showing weaker Feb pay growth + falling vacancies $GBP pic.twitter.com/YgYQzYUtEe— Viraj Patel (@VPatelFX) March 12, 2024
ONS director of economic statistics Liz McKeown said: “Recent trends in the jobs market are continuing with earnings, in cash terms, growing more slowly than recently but, thanks to lower inflation, real terms pay continues to increase."
She noted that the number of job vacancies has also been falling for coming up to two years, though the total remains more than 100,000 above its pre-pandemic level.
“Over the last year, there was little change in the proportions of people who are employed, unemployed or neither working nor looking for work, though the overall number of people in work is still rising.”