Sterling was recovering some recently lost ground against the dollar early Tuesday, after UK figures showed the labour market remains tight, despite inflation and a weakening economy.
The three-month UK unemployment rate was estimated at 3.7% for May, 0.3 percentage point lower than the previous three-month period, and 0.2 percentage point below pre-coronavirus pandemic levels. The figure also beat market consensus forecasts, according to FXStreet, of 3.8%.
The Office for National Statistics also released figures showing regular pay in the UK was up 4.2% year-on-year in the January-to-March period. Average total pay growth for the private sector was 8.2% in January to March, and for the public sector was 1.6% in the same time period.
Capital Economics said: ‘The labour market has remained stronger than expected even though the economy has been weaker than anticipated. This supports our view that the Bank of England will have to raise interest rates further than widely expected, perhaps from 1.00% now to 3.00% next year.’
The pound was quoted at $1.2395 early Tuesday, higher than $1.2250 at the London equities close on Monday.
‘Overall, the data continue to point to the risk of further domestic inflation pressures from a tight labour market,’ said Lloyds Bank.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 7,479.49
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Hang Seng: up 3.2% at 20,576.46
Nikkei 225: closed up 0.4% at 26,659.75
S&P/ASX 200: closed up 0.3% at 7,112.50
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DJIA: closed up 26.76 points, 0.1%, at 32,223.42
S&P 500: closed down 0.4% at 4,008.01
Nasdaq Composite: closed down 1.2% at 11,662.79
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EUR: up at $1.0460 ($1.0402)
GBP: up at $1.2395 ($1.2250)
USD: firm at JP¥129.26 (JP¥129.10)
Gold: up at $1,828.80 per ounce ($1,812.63)
Oil (Brent): up at $112.90 a barrel ($112.19)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday’s key economic events still to come
Fed Chair Powell and BoE Deputy Governor Cunliffe speak at Future Of Everything Festival
1100 CEST EU gross domestic product
1100 CEST EU flash estimate employment EU and euro area
0830 EDT US retail sales
0855 EDT US Fed St Louis President Bullard speaks at Energy Infrastructure Council conference
0915 EDT US industrial production
1000 EDT US NAHB housing market index
1630 EDT US API weekly statistical bulletin
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Shanghai declared it has achieved ‘zero-Covid’ across all its districts, sparking derision on social media as millions in China’s biggest city remained under lockdown. Confronted with its worst outbreak since the beginning of the pandemic, China – the last major economy still closed off to the world – put the city of 25 million under heavy restrictions in early April. The government’s insistence on squashing the Omicron variant-driven outbreak prompted rare protests and angry scuffles with authorities as Shanghai residents reject the prolonged confinement and food shortages. ‘All 16 districts of Shanghai have already achieved zero-Covid at the community level,’ Shanghai health commission official Zhao Dandan told reporters on Tuesday. That means none of the over 1,000 new infections recorded on Tuesday was detected outside of quarantined areas, city authorities said.
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BROKER RATING CHANGES
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SocGen cuts Unilever to ’sell’ (buy) - price target 3400 (4300) pence
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Barclays raises Imperial Brands target to 2300 (2100) pence - ’overweight’
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RBC raises Diploma to ’sector perform’ (underperform) - price target 2450 (2600) pence
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COMPANIES - FTSE 100
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Vodafone reported strong revenue growth in financial 2022, aided by Service revenue growth in Europe and Africa, but offered no further updates on its new largest shareholder, Emirates Telecommunications. For the financial year that ended March 31, Vodafone’s pretax profit fell to €3.95 billion from €4.40 billion, but operating profit improved to €5.66 billion from €5.10 billion. Revenue was up to €45.58 billion from €43.81 billion, with Service revenue up 2.6% to €38.20 billion. Chief Executive Nick Read said: ‘Our near-term operational and portfolio priorities remain unchanged from those communicated 6 months ago. We are focused on improving the commercial performance in Germany, actively pursuing opportunities with Vantage Towers and strengthening our market positions in Europe. These actions, together with the simplification of our portfolio and the ongoing delivery of our organic growth strategy, will create further value for our shareholders.’ Vodafone left its annual dividend unchanged at 9.00 euro cents. Emirates Telecom, formerly known as Etisalat, has taken a 9.8% shareholding but said it has no plans to make a takeover offer. On Saturday, it said subsidiary Atlas 2022 Holdings Ltd purchased 2.77 billion Vodafone shares for about $4.4 billion, praising the quality of the business and its brand.
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Tobacco firm Imperial Brands said it was ‘pleased’ with its performance in the first half of its financial, as it was able to up its interim dividend but saw a sharp drop in profit. In the six months to March 31, operating profit slumped 27% to £1.20 billion from £1.64 billion. Imperial noted that operating profit in the recent year suffered from £201 million in charges for its exit from Russia, while the year before benefited from a £281 million gain from the sale of its cigar business. Pretax profit was down to £1.26 billion from £2.06 billion. Net revenue declined by 1.3% to £15.36 billion from £15.57 billion, which was blamed on lower excise duty in Europe. Imperial upped its interim dividend to 42.54 pence, rising 1.0% from 42.12p issued in the same period a year prior.
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UK competition regulators have said they will be taking a closer look at London Stock Exchange’s acquisition of Quantile. Earlier this month, Competition & Markets Authority had given LSEG a week to soothe the competition concerns it had about the deal. On Tuesday, however, the CMA said it will refer the merger for ‘an in-depth investigation’. The regulator said the undertakings that LSEG had offered did not provide ‘clear-cut solutions’ to its concerns. In December, LSEG announced that it would acquire portfolio, margin and capital optimisation services provider Quantile for up to £274 million, an acquisition which would allow the stock exchange operator to expand its range of post-trade risk management solutions to its customers.
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COMPANIES - FTSE 250
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ContourGlobal has agreed to a takeover by US private equity firm Kohlberg Kravis Roberts. New York-based KKR has offered 263.6 pence per share for ContourGlobal, valuing the London-based power generation firm at about £1.75 billion. It closed trading in London on Monday at 193.40p, giving it a market cap of about £1.25 billion. ContourGlobal’s board have unanimously recommended the deal. Chair Craig Huff said the offer will ‘provide an opportunity for all shareholders to crystallise their investment in ContourGlobal at an attractive price’. ‘The board of ContourGlobal welcomes KKR’s intention to provide capital and operational expertise to support ContourGlobal’s strategy, including accelerating investments in the energy transition,’ he added.
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COMPANIES - GLOBAL
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Indian state-owned insurance for, LIC slumped on its market debut Tuesday following the country’s biggest-ever initial public offering, opening 7% below the offer price. Prime Minister Narendra Modi’s government raised $2.7 billion by selling 3.5% of Life Insurance Corp of India as his administration seeks to privatise state assets to plug a gaping budget deficit. But it was forced to cut back the offer from a planned 5% after markets turned volatile following Russia’s invasion of Ukraine and China’s Covid lockdowns. The offer price of 949 rupees had valued LIC at $77 billion, but it opened Tuesday on Mumbai’s exchange trading 7% lower. The share price dropped to 9.4% down, before recovering slightly.
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Tuesday’s shareholder meetings
Accesso Technology Group PLC - AGM
Capital & Regional PLC - AGM
Chaarat Gold Holdings Ltd - AGM
Chesnara PLC - AGM
Equals Group PLC - AGM
European Assets Trust PLC - AGM
Fidelity Japan Trust PLC - AGM
Fintel PLC - AGM
Fresnillo PLC - AGM
GCP Asset Backed Income Fund Ltd - AGM
Greggs PLC - AGM
IQGeo Group PLC - AGM
Kefi Gold & Copper PLC - GM re share placing
Mears Group PLC - AGM
Mercantile Investment Trust PLC - AGM
Vitec Group PLC - AGM
Vivo Energy PLC - AGM
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