UK unemployment creeps higher, dampening market sentiment / Image Source: Adobe

Stock prices in London fell on midday Tuesday, as investors digested the rising UK unemployment rate, a day before the next interest rate decision by the Fed in the US.

The FTSE 100 index was down 61.69 points, 0.8%, at 8,166.79. The FTSE 250 was down 49.29 points, 0.2%, at 20,396.75, and the AIM All-Share was down 2.35 points, 0.3%, at 785.93.

The Cboe UK 100 was down 0.7% at 814.50, the Cboe UK 250 was down 0.3% at 17,873.77, and the Cboe Small Companies was down 0.1% at 16,855.21.

In European equities on Tuesday, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 0.5%.

‘More stable market conditions will be welcomed by investors who have had their patience tested in recent weeks. Despite several central banks starting the journey to cut interest rates, expectations for when the Federal Reserve and Bank of England will get the scissors out keep being pushed back,’ said AJ Bell’s Russ Mould.

The US Fed takes central stage on Wednesday, with its latest interest rate decision. The FOMC meeting begins Tuesday.

At the central bank’s fourth meeting of 2024, the Fed is expected to leave interest rates unchanged.

Eyes will be on what is said about the trajectory of future interest rates.

Ipek Ozkardeskaya at Swissquote Bank said the Fed ‘is widely expected to trim its rate cutting projections for this year due to sticky inflation and still-tight jobs market.’

Meanwhile, Luca Santos, market analyst at ACY Securities, said: ‘There is speculation about an upward revision in the 2024 median forecast, suggesting the possibility of two rate cuts by the end of the year, instead of the previously projected three, along with an upward skew in individual rate projections.’

Helping shape decisions will be Wednesday’s US consumer price inflation report. A cooler-than expected inflation reading will prop up hopes of interest rate cuts, whilst hotter data will do the opposite.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.4%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.2%.

Back in the UK, investors have been digesting the morning’s UK unemployment data.

According to the Office for National Statistics, the jobless rate ticked up to 4.4% in three months to April from 4.3% in the three months to March. According to FXStreet, markets were expecting the unemployment rate to remain unchanged.

‘The cracks that have been appearing in the UK labour market have widened over the last few months as businesses took stock of the cost of last year’s scorching prices and the wage increases they had to dole out,’ said AJ Bell’s Danni Hewson.

The pound was quoted at $1.2745 at midday on Tuesday in London, higher compared to $1.2722 at the equities close on Monday. The euro stood at $1.0745, up against $1.0739. Against the yen, the dollar was trading at JP¥157.20, higher compared to JP¥156.89.

Miners were firmly in the red on Tuesday at around midday. Rio Tinto, Anglo American, Fresnillo, Glencore and Antofagasta were down 1.9%, 0.6%, 0.2%, 3.1%, and 3.0%.

In the FTSE 250, Oxford Instruments rose 7.6%.

The Abingdon, England-based company is a provider of technology products and services for industrial companies and research communities.

In the year ended March 31, statutory pretax profit decreased 3.0% to £71.3 million from £73.5 million the year prior. Revenue rose 5.8% to £470.4 million from £444.7 million over the same period.

Oxford Instruments announced a final dividend of 15.90 pence per share, up 6.7% from 14.90 pence. This brings the total dividend paid in the year to 20.80p, reflecting a 6.7% increase from 19.50p.

Senior edged up 1.4%, after it said it has won contracts with Collins Aerospace, part of New York-listed RTX Corp, worth about $80 million over 10 years. Senior Aerospace will make thrust reverser structural components for Boeing 787, Airbus A320neo and Airbus A220 aircraft.

Amongst London’s small-caps, Capricorn Energy jumped 14%.

The oil and gas exploration company confirmed that first production from the Sangomar Field development offshore Senegal has commenced.

It said that it has received confirmation from Woodside that the first oil condition under the sale and purchase agreement has been satisfied.

Raspberry Pi shares rose to 372.88p.

This is well above the 280p per share IPO price disclosed by Raspberry Pi earlier Tuesday. At the IPO price, Raspberry Pi would have a market value of around £541.6 million, the company said in a statement.

Kathleen Brooks, research director at XTB said the IPO was ‘good news for the UK’ with the market debut seeing ‘extremely strong demand.’

‘This is a sign that there is life in the London stock market, and companies can derive value from listing in London,’ Brooks commented.

Brent oil was quoted at $81.33 a barrel at midday in London on Tuesday, higher from $80.81 late Monday. Gold was quoted at $2,308.70 an ounce, up against $2,305.10.

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Issue Date: 11 Jun 2024