21st Jan 2025 07:51
(Alliance News) - Stocks were called to open slightly higher on Tuesday morning, as UK market participants digest the latest unemployment data.
The UK's unemployment rate rose above analysts' forecast in November, to its highest level since May 2024, although average earnings also increased.
Regardless, the UK is somewhat unpopular with investors this month, according to Hargreaves Lansdown's Emma Wall.
"It turns out it is not better the devil you know for UK investors – who have started the year shunning domestic equities and casting doubt on the economy's ability to grow," Wall commented. "Surveyed before last week's inflation and GDP growth figures were released, HL clients are sceptical about economic growth, with confidence in the outlook falling 5%...Investors revealed similar negativity when it comes to the UK stock market – the only sector in which investors' confidence dropped this month, and by more than 10%.
"Perhaps weighing on investors' minds was the sizable 30-year gilt issuance from the UK that week, with yields at multi-decade highs. But despite offering an attractive real rate of return, the market offered little demand, such is the expectation that bond yields will rise further in the near term.
"Both stock and bond market volatility followed, and significant political discussion too – with the rumour mill swirling that the increased cost to service this new debt would have to mean another tax hike or spending cut from [Chancellor Rachel Reeves] in the spring statement."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 4.5 points, 0.1% at 8,525.04
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Hang Seng: up 0.9% at 20,097.59
Nikkei 225: up 0.3% at 39,027.98
S&P/ASX 200: up 0.7% at 8,402.40
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Financial markets in New York were closed on Monday for Martin Luther King Jr Day
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EUR: lower at USD1.0382 (USD1.0399)
GBP: lower at USD1.2284 (USD1.2298)
USD: lower at JPY155.57 (JPY155.69)
GOLD: higher at USD2,729.59 per ounce (USD2,707.18)
OIL (Brent): lower at USD79.02 a barrel (USD79.69)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
08:30 EST Canada CPI
11:00 CET eurozone ZEW economic sentiment survey
11:00 CET Germany ZEW economic sentiment survey
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The UK's unemployment rate rose above analysts' forecast in November, data from the Office for National Statistics showed on Tuesday. In the three months to November 30 the UK unemployment rate for people aged 16 years and over was estimated at 4.4%, the ONS reported. This was above the 4.3% recorded for the three months to October, with FXStreet-cited consensus having expected no change. It was the highest level of unemployment since May 2024. Michael Brown of Pepperstone cautioned: "There is, however, frankly little use in looking too closely at the figures as, despite spending over GBP40 million 'transforming' the labour force survey, the ONS' data remains littered with uncertainty, amid an incredibly low survey response rate, hence lessening the weight that policymakers place on the data." For the same period, average earnings in the UK excluding bonuses increased 5.6%, up from 5.2% and surpassing the consensus estimate of 5.5%. Including bonuses, average earnings increased 5.6% in line with consensus, and up from 5.2%.
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Rachel Reeves will bid for more investment in Britain as she travels to the World Economic Forum's annual meeting in Davos this week. The UK chancellor is expected to meet the heads of major international banks during her two-day visit to the Swiss town on Wednesday and Thursday in an effort to tout the UK as an investment opportunity. In what the Treasury has described as the UK's "most visible" presence "in years" at the annual meeting of business and political leaders, she will be joined by Business Secretary Jonathan Reynolds who will meet with corporate chiefs and foreign trade ministers. Reeves said: "Business leaders and investors need to know that the UK is where their businesses will flourish, so I'm meeting them face-to-face in Davos to make our case. "We are one of the most exciting places in the world for them to put their money, with a history of innovation, a skilled workforce and a stable government that backs business." The government has made securing economic growth its primary goal, and sees bringing in more foreign investment as part of achieving that aim.
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The UK government is preparing to approve expansions to three London airports as part of a push to spur growth, according to Bloomberg. According to Bloomberg sources, ministers are set to publicly signal support for a long-sought third runway at Heathrow, sign off on plans to bring the second strip at Gatwick into full-time use, and allow an increase in the capacity at Luton Airport. "We are determined to get our economy moving and secure the long-term future of the UK's aviation sector," the government said in a statement. "All expansion proposals must demonstrate they contribute to economic growth" while staying in line with environmental obligations. Other projects poised to be signed off after being delayed are the Lower Thames Crossing, a road tunnel beneath London's Thames River, and a Universal Studios theme park north of the capital, the report suggested.
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US President Donald Trump fired four senior government officials appointed by his predecessor early Tuesday and warned "over a thousand more" faced imminent dismissal, via social media. "My Presidential Personnel Office is actively in the process of identifying and removing over a thousand Presidential Appointees from the previous Administration, who are not aligned with our vision to Make America Great Again," Trump said on the Truth Social platform. He named four individuals – Jose Andres from the President's Council on Sports, Fitness & Nutrition, Mark Milley from the National Infrastructure Advisory Council, Brian Hook from the Wilson Center for Scholars, and Keisha Lance Bottoms from the President's Export Council – as being immediately dismissed. "Let this serve as Official Notice of Dismissal for these 4 individuals, with many more, coming soon," the post said. It concluded with the words "YOU'RE FIRED!", Trump's catchphrase from his days as the boss of the hit TV show "The Apprentice".
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Trump has ordered the withdrawal of the US from the World Health Organization, or WHO. Trump signed the order in the White House in Washington just hours after his inauguration on Monday. "We're being ripped off by the World Health," he told reporters. "Everybody rips off the US and that's it, it's not going to happen anymore." Trump's order sets in motion the country's exit from the global body in 12 months' time. The order said the US was withdrawing "due to the organization's mishandling of the COVID-19 pandemic that arose out of Wuhan, China, and other global health crises, its failure to adopt urgently needed reforms, and its inability to demonstrate independence from the inappropriate political influence of WHO member states." It added that the WHO continued to "demand unfairly onerous payments" from the US. China had 300% of the population of the US, yet contributed 90% less, the order said.
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Trump, in his inaugural address, repeated his complaint that China was effectively "operating" the Panama Canal through its growing presence around the vital waterway, which the US handed over at the end of 1999. "We didn't give it to China, we gave it to Panama. And we're taking it back," Trump said after taking the oath inside the US Capitol. Trump has been raising pressure for weeks over the canal – through which 40% of US container traffic travels – and has repeatedly refused to rule out military force against Panama, historically friendly to Washington. Panamanian President Jose Raul Mulino swiftly denied that any other nation was interfering in the canal linking the Atlantic and Pacific Oceans, saying his country operated it through a principle of neutrality. "The canal is and will remain Panama's," Mulino said, calling for dialogue to address any issues.
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Trump on Monday pardoned or commuted the prison sentences of all of the 1,500-plus people charged with crimes in the January 6 2021, US Capitol riot. Pardons included people convicted of seditious conspiracy and assaulting police officers, with the President using his clemency powers on his first day back in office to undo the massive prosecution of the unprecedented assault on the seat of American democracy. Trump's action, just hours after his return to the White House, paves the way for the release from prison of dozens of people found guilty of violent attacks on police, as well as leaders of far-right extremist groups convicted of plotting to stop the peaceful transfer of power after Trump lost the 2020 election to former president Joe Biden. The pardons are a culmination of Trump's years-long campaign to rewrite the history of the January 6 attack that left more than 100 police officers injured as rioters — some armed with poles, bats and bear spray — overwhelmed law enforcement, shattered windows and sent lawmakers and aides running into hiding. Casting the rioters as "patriots" and "hostages," Trump has claimed they were unfairly treated by the Justice Department that also charged him with federal crimes in two cases he contends were politically motivated.
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Trump signed an executive order on Monday temporarily suspending all US foreign assistance programs for 90 days pending reviews to determine whether they are aligned with his policy goals. It was not immediately clear how much assistance would initially be affected by the order as funding for many programs has already been appropriated by US Congress and is obligated to be spent if not already spent. The order was among many Trump signed on his first day back in the office, said the "foreign aid industry and bureaucracy are not aligned with American interests and in many cases antithetical to American values" and "serve to destabilise world peace by promoting ideas in foreign countries that are directly inverse to harmonious and stable relations internal to and among countries." Consequently, Trump declared that "no further US foreign assistance shall be disbursed in a manner that is not fully aligned with the foreign policy of the President of the US."
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The Senate has confirmed Marco Rubio as Secretary of State, voting unanimously to give President Donald Trump the first member of his new Cabinet on Inauguration Day. Rubio, the Republican senator from Florida, is among the least controversial of Trump's nominees and the vote was decisive, 99-0. Another pick, John Ratcliffe for CIA director, is also expected to have a swift vote. Action on others, including former combat veteran and Fox News host Pete Hegseth for defence secretary, is expected later in the week. "Marco Rubio is a very intelligent man with a remarkable understanding of American foreign policy," senator Chuck Grassley of Iowa, the senior-most Republican, said as the chamber opened. Senate Democratic Leader Chuck Schumer said his party will "neither rubber-stamp nominees we feel are grossly unqualified, nor oppose nominees that deserve serious consideration". Rubio, he said, is an example of "a qualified nominee we think should be confirmed quickly".
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BROKER RATING CHANGES
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Morgan Stanley cuts Pearson to 'equal-weight' - price target 1,300 pence
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Oddo BHF starts BT with 'underperform' - price target 118 pence
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Berenberg cuts Loungers to 'hold' (buy) - price target 325 (380) pence
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COMPANIES - FTSE 250
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Infrastructure services company Kier Group said it continued to trade well and in line with internal expectations in the first half of the year ending June 30. Its order book was worth approximately GBP11 billion at December 31, up around 2% from GBP10.7 billion one year prior. It said it has secured revenue of over 95% for the current year, providing a high degree of visibility. Kier also announced a new GBP20 million share buyback, citing its "strong, stable and flexible balance sheet, capable of supporting growth opportunities".
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Baillie Gifford US Growth Trust announced its half-year results "for a highly successful period for the company's growth strategy". Its NAV return for the six months to November 30 was 29.4%, significantly outperforming the S&P 500 index on sterling terms which returned 15.3%. However the trust hit out at Saba Capital, which has requisitioned a general meeting on February 3, saying: "Nevertheless, despite this extremely strong performance, Saba has sought to introduce self-serving and destructive proposals to remove the independent board and try to assume control of the company through placing two of its own nominees on the board and will likely thereafter attempt to assume management of the company. The company and the strong growth potential shown in today's results is directly under threat in a vote where every vote will count. We therefore reiterate urging all shareholders to VOTE AGAINST Saba's proposals. If shareholders have not already done so, the next few days will likely be their last chance to vote ahead of the deadline - it's critical they do not miss the opportunity to save their investment from an uncertain and potentially destructive trajectory."
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OTHER COMPANIES
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RC Fornax, a UK-based engineering consultancy for military platforms, is planning an initial public offering on AIM in early February. Fornax, founded in 2020, is looking to raise GBP5 million in its IPO to develop an advanced AI tool known as the Fornax Automatic Statement of work Generator. This is designed to streamline the creation of SoWs [statements of work] by harnessing the company's expertise and in-depth industry knowledge, Fornax said. It noted its generation of GBP900,000 in earnings before interest, tax, depreciation and amortisation and GBP6.5 million in revenue for 2024.
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Thungela Resources has hired De Beers executive Moses Madondo to be its new chief executive officer, starting on August 1. Madondo will succeed the current CEO, July Ndlovu, who will step down in July. The Rosebank, South Africa-based coal miner said Ndlovu will reach the retirement age of 60 years in July. In line with the company's retirement policy, he is scheduled to retire in 2025. Ndlovu has been at the helm since Thungela was spun off from Anglo American in June 2021. He led the listing of the coal producer both on the London and Johannesburg stock exchanges that same month. Madondo is currently CEO of De Beers Group Managed Operations and brings over 25 years of mining experience to the role in various senior leadership positions. De Beers is part of Anglo American.
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By Emma Curzon, Alliance News reporter
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