Share prices in London opened lower on Tuesday, underperforming other European markets, after a somewhat perplexing UK jobs report and an earnings miss by blue-chip lender Barclays.
The FTSE 100 index opened down 24.75 points, or 0.3%, at 7,350.08. The FTSE 250 was down 27.63 points, 0.2%, at 17,031.36, and the AIM All-Share was down 1.76 points, 0.3%, at 678.65.
The Cboe UK 100 was down 0.3% at 733.54, the Cboe UK 250 was down 0.2% at 14,786.28, and the Cboe Small Companies was slightly higher at 12,714.62.
Amid continued nervousness about the potential for a wider war in the Middle East, European markets were making little headway either early Tuesday. The CAC 40 stock index in Paris was marginally higher, while the DAX 40 in Frankfurt was down 0.1%.
The UK unemployment rate for the period for June to August was estimated at 4.2%, according to delayed data from the Office for National Statistics.
The ONS explained that the figures are an ‘alternative series of estimates’, due to ‘increased uncertainty’ around the Labour Force Survey estimates due to the low response rate. This was a 0.2 percentage point increase compared with the period from March to May, the ONS said.
According to Pantheon Macroeconomics, the experimental nature of the figures ‘[raises] questions about the reliability of the data’.
‘But we see enough corroborating evidence to think the official labour market statistics are correctly signalling greater slack,’ the Pantheon analyst considered.
Last month, the ONS said unemployment stood at 4.3% in the three months ended July.
‘Changes to the way the numbers are crunched aside, figures out this morning from the ONS show a deteriorating picture in the UK jobs market,’ commented AJ Bell head of financial analysis Danni Hewson. ‘This should, in theory, reduce the pressure on the Bank of England to push interest rates higher.
In the FTSE 100, Barclays was down 5.9%.
The bank’s third-quarter revenue fell short of estimates though its profit topped consensus, despite a rise in provisions. The lender cut its margin outlook at its UK arm but maintained its return on tangible equity outlook at group level.
For the quarter ended September 30, total income rose 5.2% on-year to £6.26 billion from £5.95 billion a year prior. Total income fell short of the £6.29 billion company-compiled consensus.
Barclays reported pretax profit of £1.89 billion for the quarter, down 4.3% on-year from £1.97 billion. However, it beat the company-compiled market consensus of £1.77 billion.
Hurting profit, credit impairment charges were increased by 14% to £433 million from £381 million a year earlier.
The Barclay’s results pulled down the wider banking sector, with NatWest down 2.8%, StanChart and Lloyds losing 1.6% respectively. NatWest reports its own third-quarter results on Friday this week, after StanChart on Thursday and Lloyds on Wednesday.
Bunzl shares were down 5.0%, after reporting its third-quarter revenue was hurt by a fall in Covid-19-related sales and less inflationary tailwinds.
The distribution firm said revenue in the third quarter ended September declined by 4.8% at constant exchange rates. Underlying revenue, adjusted for the number of trading days, fell 4.7%. There was one fewer trading day than a year prior. At actual exchange rates, revenue was 8.8% lower amid a weaker pound.
Bunzl put the revenue fall to a ’continued decline in Covid-19 related product sales‘ and a lesser benefit from inflation.
In the FTSE 250, business-to-business cross-border payments provider CAB Payments sank 60%.
CAB now expects annual revenue to be ’at least‘ 20% ahead of the £109.4 million achieved in 2022. This is about 17% below its previous guidance, however. It expects the ’majority of any revenue impact‘ will hit its bottom line, but will be seeking opportunities to lessen the impact on its bottom line.
‘In recent weeks, the company has seen a number of changes to the market conditions in some of its key currency corridors, on top of the ongoing uncertainties surrounding the naira, which are impacting both volumes and margins; most notably, the Central African franc and West African franc . At the present time, these market conditions are compressing margins and reducing trading volume,’ CAB explained.
‘These challenges are recent but continuing...it is unclear when and to what extent conditions in these markets may improve,’ it warned.
Shares in ScS were up 60% to 271.15 pence after the sofa seller agreed to £99.4 million takeover offer from Italian peer Poltronesofa. ScS shareholders will receive 270p in cash, plus a 10p final dividend, for 280p in total.
The dollar was slightly weaker in early exchanges in Europe.
Sterling was quoted at $1.2269 early Tuesday, rising from $1.2226 at the London equities close on Monday. The euro traded at $1.0669, higher than $1.0639. Against the yen, the dollar was quoted at JP¥149.41, down versus JP¥149.79.
Markets failed to muster much risk appetite in light of the conflict in the Middle East, and fears it could escalate further, drawing in other countries, such as Iran.
US President Joe Biden said that any discussions about a Gaza ceasefire could only take place if Hamas frees all hostages seized from Israel in its October 7 attack. ‘We should have those hostages released and then we can talk,’ Biden said at a White House event when asked if he would support a ‘hostages-for-ceasefire’ deal.
Meanwhile, China has called for peace talks in the conflict. Foreign Minister Wang Yi said the situation must be prevented from escalating further and leading to an even greater humanitarian catastrophe, in a telephone conversation with his Israeli counterpart Eli Cohen.
Wang, China’s top diplomat, will pay a rare visit to Washington this week, the US announced, paving the way for a potential visit by President Xi Jinping aimed at keeping tensions in check.
This follows reports from US and Chinese officials of ‘productive’ first meeting of a new economic working group. ‘The two sides had in-depth, candid and constructive communication on issues such as the global macroeconomic situation and policies, bilateral economic relations, and cooperation in responding to global challenges,’ Chinese state broadcaster CCTV reported.
‘China expressed its own concerns. Both parties will continue to maintain communication,’ the report added.
Despite positive signs of easing tensions between the world’s two largest economies, the global geopolitical situation remains fraught.
The president of the World Bank told an investor conference in Saudi Arabia that the war between Israel and Hamas could deal a ‘serious’ blow to global economic development.
‘What just happened recently in Israel and Gaza – at the end of the day you put all this together, I think the impact on economic development is even more serious,’ Ajay Banga said, adding: ‘I think we’re at a very dangerous juncture.’
In the US on Monday, Wall Street ended mixed, with the Dow Jones Industrial Average down 0.6% and the S&P 500 down 0.2%. However, the Nasdaq Composite added 0.3%, as tech stocks gained ahead of earnings, and benefitted from easing US bond yields.
The yield on the ten-year US Treasury had retreated to 4.84% after topping 5% for the first time in 16 years, ending a run that has seen yields creep higher as investors bet that the US Federal Reserve will keep interest rates at their current high levels for longer.
In Asia on Tuesday, the Nikkei 225 index in Tokyo closed up 0.2%.
Japan’s private sector stagnated in October, according to preliminary survey data on Tuesday.
The au Jibun Bank flash composite purchasing managers’ index fell to 49.9 points this month from 52.1 in September, indicating a marginal contraction. This was largely attributable to slowing growth in the services sector, due to weaker new business growth amid falling foreign demand for Japanese services. Manufacturing continued to contract at the same pace as the prior month, as the decline in new orders persisted and production levels shrunk at the fastest pace in eight months.
In China, the Shanghai Composite closed up 0.8%, while the Hang Seng index in Hong Kong was down 0.9%, as financial markets in Hong Kong re-opened after a long weekend. The S&P/ASX 200 in Sydney closed up 0.2%.
Gold was quoted at $1,977.11 an ounce early Tuesday, little changed from $1,977.60 on Monday.
Brent oil was trading at $90.49 a barrel, lower than $91.05.
Still in the economic calendar are flash purchasing managers’ index releases for the UK and US.
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