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LONDON BRIEFING: UK real earnings continue to fall; stocks called down

17th Jan 2023 07:57

(Alliance News) - Stocks in London were set to open flat on Tuesday, after UK unemployment and earnings data and as the Bank of Japan kicked off its two-day policy meeting.

There has been speculation that the BoJ will call time on its yield curve control policy.

The BoJ bought over JPY2 trillion, or USD15.58 billion, worth of government bonds on Monday ahead of its meeting, according to Nikkei.

The yield on the 10-year government bond, which the financial newspaper noted serves as a benchmark for long-term interest rates, spiked above the BoJ's 0.5% target.

It was the second-successive day that the yield has spiked to above the BoJ's target.

Meanwhile, Bank of England Governor, Andrew Bailey told the Treasury Committee of Parliament that banks are much stronger financially now than in the past.

He said: "Overall mortgage debt service levels are lower than they were at points in history when we had stress – before the financial crisis and in the early '90s."

Nonetheless, a survey by the World Economic Forum found that almost two-thirds of senior economists from the public and private sector believe global conflicts and monetary tightening by central banks will probably help tip the world economy into a recession in 2023.

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

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MARKETS

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FTSE 100: called down 7.77 points, or 0.1%, at 7,852.30

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Hang Seng: down 1.0% at 21,536.83

Nikkei 225: closed up 1.2% at 26,138.68

S&P/ASX 200: closed marginally lower at 7,386.30

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US financial markets were closed on Monday for Martin Luther King Day.

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EUR: unchanged at USD1.0822

GBP: flat at USD1.2208 (USD1.2203)

USD: higher at JPY128.84 (JPY128.55)

Gold: lower at USD1,909.44 per ounce (USD1,917.90)

(Brent): firm at USD84.43 a barrel (USD84.20)

(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 CET Germany ZEW indicator of economic sentiment

11:00 GMT Ireland consumer price index

15:00 EST US Fed President John Williams speaks

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The UK unemployment rate remained steady in November, according to the latest data from the Office for National Statistics, but average pay adjusted for inflation shrank at one of the fastest rates on record. The unemployment rate was 3.7% in the UK in the three months from September to November, unchanged from the August to October period, but up from 3.5% in the June to August period. The jobless rate was in line with market consensus cited by FXstreet. In the same three month period of 2021, the UK unemployment rate was 4.1%. In the same three months of 2019, before the Covid-19 pandemic, the jobless rate was 3.8%.

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Annual growth in UK average pay including bonuses and in regular pay excluding bonuses both were 6.4% in September to November period. This means pay continued to lag inflation in the UK. Consumer prices rose by 10.7% in November from a year before. The ONS said that for the full three-month period average pay, both total and regular, fell in real teams by 2.6% on a year before. This was slightly smaller than the 3.0% fall seen in April to June last year, it noted, but still among the largest declines in real inflation-adjusted pay since records began in 2001.

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BROKER RATING CHANGES

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Bernstein cuts Unilever to 'underperform' ('market-perform') - price target 3,500 pence

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Berenberg cuts NCC Group to 'hold' ('buy') - price target 240 (260) pence

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JPMorgan cuts Quilter to 'underweight' ('neutral') - price target 74 (83) pence

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COMPANIES - FTSE 100

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Ocado Retail, a joint venture between online supermarket Ocado Group and high-street retailer Marks & Spencer, reported that revenue inched up slightly in the the 13 weeks to November 27, its financial fourth quarter. Revenue rose 0.3% against the previous year to GBP549.4 million. Average orders in the period were up 1.9% to 382,000, while average basket value fell 1.3% to GBP117, as price inflation was offset by fewer items. Full-year revenue totalled GBP2.2 billion, which represents a 3.8% decline against the year prior but up 40% against financial 2019. Ocado noted that its current headwinds related to inflationary costs, capacity investments to support future growth and higher marketing costs. Ocado Retail expects to be close to break-even earnings before interest, tax, depreciation and amortisation in financial 2022. Looking ahead to financial 2023, it expects "marginally positive" Ebitda on mid-single-digit percentage revenue growth.

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Consumer credit checker Experian said it delivered a financial third-quarter performance in line with expectations thanks to new products, new business wins and consumer expansion. Organic revenue growth in the three months ended December 31 was 6%, and total revenue growth was 7%. "While pressures in the global economy are likely to continue for some time, we expect to remain resilient, supported by the delivery of our growth strategy and growth in countercyclical revenue streams," it said. For the full financial year, Experian left its expectations for revenue unchanged at growth between 8% and 10%.

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COMPANIES - FTSE 250

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Self storage firm Safestore reported increased revenue and profit in the financial year that ended October 31. Profit climbed to GBP498.8 million against GBP404.6 million the previous year, while revenue jumped 14% to GBP212.5 million from GBP186.8 million. Chief Executive Frederic Vecchioli said that the result was achieved through strong revenue growth in the UK market as well as good performances in its Parisian and Spanish businesses. Early trading in the new financial year is broadly stable in terms of demand compared to the previous year, Vecchioli added, noting it was also significantly ahead of pre-pandemic levels.

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OTHER COMPANIES

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THG reported record sales of GBP2.25 billion in 2022, up 3.3% from GBP2.18 billion the year prior. The online retailing platform cited significant investment in price strategy through 2022 to support long-term customer retention, alongside new customer growth in established and emerging markets for the growth. Adjusted Ebitda for 2022, on a continuing basis, will be in line with current unspecified market expectations, THG said. Chief Executive Matthew Moulding said: "With the completion of the divisional reorganisation, and around GBP100 million of annual efficiency savings already delivered, the group enters 2023 with strong momentum to achieve substantial margin expansion. Core commodity prices used within our Nutrition division have seen significant deflation since their record highs in 2022, giving us confidence in significant profit progression as we move through the year ahead, against a much reduced group cost base. We remain highly confident of delivering adjusted Ebitda margins in excess of 9.0% over the medium-term."

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By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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