Jobs were in focus early Tuesday, after a report showed the UK unemployment rate ticked higher early in 2023 and telecommunications provider Vodafone announced 11,000 job cuts.
In London, the FTSE 100 stock index opened up 14.54 points, 0.2%, at 7,792.24. The FTSE 250 was 22.34 points, 0.1%, at 19,281.09, and the AIM All-Share was up 1.24 points, 0.2%, at 816.09.
The Cboe UK 100 was up 0.2% at 779.03, the Cboe UK 250 was up 0.2% at 16,853.50, and the Cboe Small Companies was flat at 13,626.93.
Market participants also were concerned about the rising possibility of US government debt default.
US President Joe Biden will reconvene crunch debt talks on Tuesday with senior Republican leaders including House Speaker Kevin McCarthy in another attempt to avert a costly US default.
The talks have a lot of ground to cover, with the two parties still sharply divided on the terms under which they will agree to lift the government’s borrowing cap to pay for existing spending commitments.
In the US on Monday, stock market sentiment was boosted by signs of progress in the debt negotiations over the weekend.
The Dow Jones Industrial Average closed up 0.1%, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.7%.
In China, economic data came in weaker than expected, and share prices slipped. The Shanghai Composite closed down 0.6%, and the Hang Seng index in Hong Kong was down 0.4%.
The National Bureau of Statistics said industrial production grew 5.6% annually in April, faster than 3.9% in March. However, this was short of market consensus of 11% growth, as cited by FXStreet.
Retail sales also came in slightly below estimates, growing 18% annually in April, compared to the market consensus of 21%. The growth was stronger than the 11% annual rise seen the month before, however.
Tuesday’s data adds to the weaker picture of China’s economic recovery painted by reports last week, with lower-than-expected consumer inflation and slowing export growth.
‘China’s April economic data is not pretty,’ said SPI Asset Management’s Stephen Innes.
‘Even though today’s activity data suggest China is mired in an extended soft patch and maybe even near a tipping point post-reopening recovery, the market likely pre-traded this data, suggesting a base effect beat down was in the price.’
Gold was quoted at $2,006.94 an ounce early Tuesday, down from $2,015.35 on Monday. Brent oil was trading at $75.25 a barrel, unchanged from $75.26.
In Tokyo, the Nikkei 225 stock index closed up 0.7%. The S&P/ASX 200 in Sydney closed down 0.5%.
In European equities, the CAC 40 index in Paris was down 0.2%, while the DAX 40 in Frankfurt was up 0.1%.
In the UK, unemployment unexpectedly ticked up in the three months to March, figures from the Office for National Statistics showed, while wage inflation proved stubborn.
The UK jobless rate edged up to 3.9% for the three months to March. Market consensus, as cited by FXStreet, had expected it to remain unchanged from 3.8% in the three months to February.
In the three months to March, annual growth in average total pay, including bonuses, slowed to 5.8% from 5.9% in the previous three-month period. It still topped market consensus estimates of 5.1%, however. Excluding bonuses, average earnings rose 6.7%, faster than the 6.6% growth last month but below market consensus of 6.8%.
The Bank of England is likely to welcome the data, having been looking to see signs of loosening in the UK’s tight labour market.
The pound was weaker in early exchanges in London.
Sterling was quoted at $1.2489 early Tuesday, down from $1.2515 at the London equities close on Monday.
The euro traded at $1.0880, up from $1.0871. Against the yen, the dollar was quoted at JP¥135.81, down versus JP¥136.07.
Vodafone was the worst performer, down 3.3%.
The Berkshire-based company said its annual performance slowed in line with its expectations. In the financial year to March 31, the telecoms provider said revenue was virtually flat year-on-year, up just 0.3% to €45.71 billion from €45.58 billion. Pretax profit jumped to €12.82 billion from €4.10 billion, largely due to a gain on the disposal of Vantage Towers in Germany.
The performance was ‘not good enough’, according to Vodafone CEO Margherita Della Valle. ‘To consistently deliver, Vodafone must change,’ she said.
Vodafone announced an ‘action plan’ to focus on ‘customers, simplicity and growth’. The simplicity element of the plan will involve cutting 11,000 jobs in the next three years.
In financial 2024, Vodafone guides for adjusted earnings before interest, tax, depreciation and amortisation after leases to be broadly flat at around €13.3 billion, with adjusted free cash flow to be around €3.3 billion, down from £4.2 billion.
Imperial Brands shed 0.5%.
The cigarette maker’s revenue edged up 0.3% to £15.41 billion from £15.36 billion a year before, as pretax profit rose to £1.44 billion from £1.26 billion. The performance came despite ‘temporarily increased volume declines’ against a strong comparator, the firm said. ‘As expected, this reflects a return to pre-Covid buying patterns as well as our decision to exit Russia last year,’ said Stefan Bomhard.
Imperial backed its previous guidance for adjusted operating profit growth in its full year. It declared an interim dividend of 43.18p per share, up 1.5% from 42.54p a year before.
Rolls-Royce was the top performer, up 3.2% to 149.80p, as Jefferies raised the stock’s price target to 210p from 170p.
In the FTSE 250, Asos jumped 6.2%, as fellow online fast-fashion retailer boohoo gained 13% on AIM after posting its annual results
boohoo said revenue fell 11% year-on-year to £1.77 billion from £1.98 billion, in the financial year to February 28. It swung to a pretax loss of £90.7 million from a profit of £7.8 million.
According to Shore Capital, the results beat consensus market expectations, and it raised the stock to ’buy’ from ’hold’.
‘Interestingly, the group reported a surprising net cash position of £6 million at the end of the period, contrary to the consensus expectation of net debt amounting to £60 million,’ Shore noted.
In financial 2023, boohoo expects revenue to be flat or to fall by as much as 5% from the prior year. The decline will be steeper in the first half, as the company increases its emphasis on making profitable sales. However, revenue growth is expected in the second half.
Commented Zainab Atiyyah, an analyst at research house Third Bridge: ‘Our experts predict that Boohoo’s sales growth will be pretty ordinary in 2023.
‘Boohoo will also want to bear in mind how clothing buying habits change when budgets are tightened. It is wrong to assume everyone trades down to cheaper brands. On the contrary, good quality clothes become a treat and many consumers actually increase their spending on big name brands and affordable luxuries during periods of tightened discretionary spending.’
Shares in animal genetics firm Genus fell 10%, as it lowered annual profit guidance.
The company warned of challenging conditions in the Chinese porcine market, due to the high supply of slaughter pigs after widespread African Swine Fever.
‘At these prices, producers are unprofitable, and many are not replacing and rebuilding their sow herds at the current time,’ Genus explained.
Consequently, its performance in China was weaker, and it now expects its Pig Improvement Co operations in China to be loss-making in the second half, compared to £8.8 million profit in the first half.
Still to come on Tuesday’s economic calendar, there is a eurozone gross domestic product reading at 1000 BST.
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