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LONDON BRIEFING: UK jobless rate sticks at 4.2% but pay growth slows

16th Jan 2024 07:37

(Alliance News) - Stocks in London are called to open lower on Tuesday, following data showing that the UK jobless rate was unchanged at 4.2% as pay growth slowed.

Figures from the Office for National Statistics were released early Tuesday. They showed that UK unemployment was steady in the three months to November, but pay growth decelerated.

On Wednesday, investors will then have UK consumer and producer price inflation readings to digest.

With this slew of data, Michael Hewson, chief market analyst at CMC Markets UK, said "the next few days has the potential to shift the dial on the timing of when we might see the first rate cut from the Bank of England."

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called down 0.4% at 7,563.40

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Hang Seng: down 2.0% at 15,896.24

Nikkei 225: closed down 0.8% at 35,619.18

S&P/ASX 200: closed down 1.1% at 7,414.80

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DJIA: closed for US Martin Luther King Jr Day

S&P 500: closed for US Martin Luther King Jr Day

Nasdaq Composite: closed for US Martin Luther King Jr Day

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EUR: down at USD1.0920 (USD1.0950)

GBP: down at USD1.2683 (USD1.2734)

USD: up at JPY146.08 (JPY145.77)

Gold: down at USD2,049.33 per ounce (USD2,053.53)

(Brent): up at USD78.14 a barrel (USD78.09)

(changes since previous London equities close)

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ECONOMICS

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Tuesday's key economic events still to come:

11:00 EST US Federal Reserve board member Christopher Waller speaks

15:00 GMT UK Bank of England Governor Andrew Bailey speaks

Switzerland World Economic Forum annual meeting in Davos continues

08:00 EST Canada CPI

08:00 EST Canada housing starts

11:00 CET eurozone ZEW economic sentiment survey

11:00 CET Germany ZEW economic sentiment survey

11:00 GMT Ireland CPI

10:00 CET Italy CPI

08:00 EST US NY Empire State manufacturing index

10:00 CET ECB consumer expectations survey results

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UK unemployment was steady in the three months to November, figures from the Office for National Statistics showed on Tuesday. The unemployment rate for the period from September to November was 4.2%, unchanged from the August to October period. The figure came in line with FXStreet-cited market consensus. Also in the three months to September, annual growth in average total pay, excluding bonuses, was 6.6%. This in line with market consensus as well and slower than growth in the previous three-month period of 7.3%. Including bonuses, average pay growth was 6.5%, lower than market expectations of 6.8% and 7.2% in the three months to October. The ONS began to use 'experimental' unemployment data in October, owing to a low response rate for its survey.

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Labour will need a historic swing to win the UK general election expected in 2024, as the party's path to power has been made more difficult by extensive boundary changes. Keir Starmer will have to achieve a swing of 12.7 points from the Conservatives to become prime minister, new research shows – larger than the 10.2 point swing Tony Blair managed in his 1997 landslide, and more than double the swing at any other election since 1945. His task is made harder by the impact of the boundary changes, the first since 2010, and intended to ensure that constituencies have similar numbers of voters. The new parliamentary constituencies were drawn up by the permanent and independent Boundary Commissions for England, Scotland, Wales and Northern Ireland, and fewer than 12% of the 650 Commons seats were left untouched.

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BROKER RATING CHANGES

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Peel Hunt cuts Taylor Wimpey to 'hold' (add) - price target 145 (125) pence

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Berenberg cuts Rolls-Royce to 'sell' (hold) - price target 240 (100) pence

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UBS raises GSK to 'buy' (sell) - price target 1,860 (1,310) pence

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COMPANIES - FTSE 100

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Ocado reported an 11% annual jump in retail revenue to GBP609.4 million in the 13 weeks to November 26. It said this marks the fourth consecutive period of quarter-on-quarter growth. Across the full financial year, retail revenue rose 7.0% on-year to GBP2.36 billion. Looking at its winter period, Ocado said it delivers "another record Christmas" and hit its highest ever level of sales over the peak Christmas trading period. Ocado Retail's Chief Executive Officer Hannah Gibson said: "We are starting the new year with over one million active customers. Over the next 12 - 18 months, we will be embedding the foundations we have laid this year and raising the bar again for online grocery shopping. We have a really strong platform to build on in 2024."

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Miner Rio Tinto released its production results for the fourth quarter of 2023. Its Pilbara iron ore production fell 2% year-on-year to 87.5 million tonnes in the fourth quarter, but over 2023 as a whole, production rose 2% to 331.5 million. Pilbara shipments slipped 1% to 86.3 million in the fourth quarter, but rose 3% to 331.8 million in 2023 overall. It left its December guidance for production in 2024 unchanged, expecting Pilbara shipments to be in a range of 323 to 338 million tonnes. Commenting on the outlook for key markets in 2024, Rio Tinto said it expects Chinese stimulus measures to drive a "gradual recovery" over the year, "albeit weighted towards the second half", with weakness to persist in the real estate sector. It also noted the "subdued" growth in industrial production in the US and the ongoing manufacturing contraction, as the overall US economy slows with the cooling of the labour market. In the EU, it expects a slow recovery from a "low base" later in the year. Shares in Rio Tinto closed down 1.5% in Sydney.

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A record number of global institutions have co-filed a shareholder resolution at Shell, calling for the UK-headquartered oil major to align its emissions reduction targets with the Paris Climate Agreement. The resolution, led by Dutch activist group Follow This, has been backed 27 institutions, including Nest, Rathbones, Brunel Pension Partnership and Amundi. It proposes that Shell set its medium-term targets for scope three greenhouse gas emissions to be consistent with efforts to limit global warming to 1.5C above pre-industrial levels. Scope three emissions, or value chain emissions, are those from the use of oil and gas by consumers and make up the bulk of the firm's impact. The resolution leaves the strategy for achieving these targets up to the board.

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COMPANIES - FTSE 250

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Investment bank Berenberg said Northzone VI has sold its remaining stake of around 5.2 million shares in Trustpilot. The sale of shares in the Copenhagen-based consumer reviews platform took place through a placing, which was announced on Monday. Berenberg acted as sole bookrunner and placing agent in relation to the placing. Northzone is a venture capital fund that has backed Trustpilot for the past 12 years. Northzone first backed Trustpilot back in 2011 as lead investor in a series A funding round. That round valued Trustpilot at EUR7 million. Since then, Trustpilot has floated, joining the London Stock Exchange back in March 2021. It is currently valued at GBP690.6 million, though shares are down from its 265p in initial public offering price.

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Spirent Communications said that its 2023 results are in line with its revised expectations "following a challenging year." Fully year revenue closed at USD474 million, down considerably from USD607 million a year earlier. Looking ahead, Spirent said it has started the new financial year with a growing order book. "We are making good progress diversifying and expanding our customer base whilst our telco end market key customers are managing their own challenges driven by the macroeconomic environment," Chief Executive Eric Updyke said.

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OTHER COMPANIES

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Card Factory said financial 2023 pretax profit is expected to be at the top of the range of market expectations. The current range of market expectations for financial 2024 adjusted pretax profit is GBP58.4 million to GBP62.0 million. In the 11 months ended December 31, the retailer booked sales of GBP476.9 million, up 10% from GBP432.6 million a year earlier. Chief Executive Darcy Willson-Rymer said: "We are pleased to have delivered a strong performance over the Christmas period, further demonstrating the progress we are making on our strategic growth initiatives. Our value and quality proposition continues to resonate with customers at a time when value for money is as important as ever. Even during challenging times, consumers want to celebrate key life moments and this was reflected in the positive performance that we saw in the Christmas trading period and throughout the year to date."

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City brokers Panmure Gordon and Liberum said they have agreed to an all-share merger that will create the "UK's largest independent investment bank" with over 250 quoted corporate clients. The combined firm, to be called Panmure Liberum, will be led by Shane Le Prevost, the founder of Liberum, as non-executive chair, and by Rich Ricci, the chief executive officer of Panmure Gordon, as CEO. Financial support for the merger will come from Atlas Merchant Capital, founded and led by former Barclays chief Bob Diamond. The two companies said their merger will be positive for the London equity market. "The creation of Panmure Liberum will ensure that together it has the scale to be at the forefront of key market initiatives to reinvigorate the appeal of UK listed equities and of listing companies and funds in the UK," they said.

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By Sophie Rose, Alliance News senior reporter

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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