20th Apr 2016 11:10
LONDON (Alliance News) - A pullback in oil prices was largely responsible for losses seen in London share prices by midday Wednesday, but also not helpful was a jobs report providing evidence that momentum in the UK labour market was slowing.
Data from Office for National Statistics showed the UK employment rate was 74.1% in the three months to February, the joint highest since comparable records began in 1971. However, the employment level has remained at 74.1% over the last three period, suggesting some stagnation in UK employment.
"A narrative of recovering productivity growth has long anticipated the moderation in the pace of job gains, but the scale of the recent easing – as final data available in advance of the May Inflation Report – may give the [Bank of England's Monetary Policy Committee] some pause for thought on the available spare capacity in the labour market," said economists at Lloyds Bank.
The UK unemployment rate held steady at a 10-year low in the three months to February. The jobless rate came in at 5.1% from December to February, unchanged from previous three months and matching economists' expectations.
However, average earnings growth including bonuses slowed by 1.8%, from 2.1% in the prior period. This fell short of economists' expectation for a 2.3% rise.
Even though on the whole, the data were slightly disappointing, Lloyds does not believe the report provides any meaningful arguments for the MPC to change policy in either direction.
The Bank of England's May inflation report, as well as its monetary policy decision and meeting minutes, will be issued on May 12.
The pound initially fell against other major currencies after the jobs report, but has since overturned those losses. Against the dollar, the pound trades at USD1.4372 at midday, having fallen to USD1.4343 following the data.
The FTSE 100 traded down 0.3%, or 18.36 points, to 6,386.99. The blue-chip index was again following the plight of oil prices, which declined Wednesday after oil workers in Kuwait ended their three-day strike.
A spokesman for the state-run oil sector Talal al-Khaled said that employees were back at work and that the Gulf country would need three days to return to its normal production of 3 million barrels per day. The stoppage had halved Kuwait's production of oil, the OPEC nation's main source of income, according to local media.
On Sunday, thousands of oil workers in the country started an open-ended strike to protest planned government cutbacks.
The strike action and the disruption to Kuwait's oil supply had helped prop up oil prices this week after failed international talks to freeze production. However, following the end of the walk-out, Brent oil was trading at USD43.36 midday Wednesday. This was lower than the USD43.99 seen at the London equity close on Tuesday.
The FTSE 250 index was down 0.4% at 16,982.23, and the AIM All-Share was down 0.1% at 733.41. In Europe, the CAC 40 index in Paris was down 0.2% as was the DAX 30 in Frankfurt.
Across the water, futures indicated a lower open on Wall Street. The Dow 30, S&P 500 and the Nasdaq 100 indices all were pointed down 0.2%.
US earnings season continues with soft drinks maker Coca-Cola reporting before the market open, while fast food company Yum! Brands reports first quarter earnings after the New York closing bell.
In UK company news, GKN said trading in the first quarter met its expectations, though it has taken a hit to its trading margin from a shift in the revenue mix of its aerospace arm.
The company, which makes airframe structures and automotive driveline systems, said sales in the three months to the end of March hit GBP2.18 billion, up from GBP1.94 billion a year before. Organic sales grew 1.0% and the group got a 3.0% boost from beneficial currency moves, but the majority of the rise was driven by acquisitions.
GKN said its trading margin in the quarter was weaker year-on-year due to a hit taken in its Aerospace business, which makes airframe and engine structures for planes. The weakness in the margin was driven by lower military sales in the quarter, reflecting a continued decline in sales from mature programmes, mainly the Boeing F/A-18 Super Hornet fighter jet and the UH-60 Black Hawk helicopter.
The stock was one of the best performers in the FTSE 100 up 2.2%.
Fellow blue-chip ARM Holdings was up 2.5% after the micro processor designer reiterated expectations for full-year dollar revenue in line with market expectations, as it reported a rise in pretax profit for its first quarter.
ARM saw pretax profit rise to GBP112.0 million in the first quarter of 2016, up from GBP103.4 million the year before, as revenue rose 14% to USD398.0 million from USD348.2 million. In sterling, revenue rose 22% to GBP276.4 million from GBP227.5 million.
ARM said, at the start of 2016, it has seen its current technology gaining share in target end markets and strong demand for its next generation of products from a wide range of companies.
In the FTSE 250, N Brown Group was the worst performing stock, down 14%. The online and catalogue fashion retailer reported a fall in profit in its recently-ended financial year due to exceptional costs it booked, but revenue was boosted by a continued strong performance from its three 'power brands'.
Despite the mixed past results, shares still fell as N Brown issued a profit warning for the current year. N Brown warned that trading since the year-end has been subdued with lower year-on-year sales.
"Looking forward, whilst we face challenging market conditions for the fashion sector overall, and trading since the year end has been subdued, we remain confident in our ability to make further progress this year," N Brown Chief Executive Angela Spindler said.
Pest control company Rentokil Initial, up 2.7%, said its pest control operations had a strong first quarter, boosted by the big acquisitions it made in North America last year and by robust organic growth.
The FTSE 250-listed group said total first quarter revenue hit GBP472.0 million, with GBP468.1 million of that from its ongoing operations. Revenue from ongoing operations grew 12% year-on-year in the quarter at constant currencies, with 2.8% of this growth organic and the balance driven by acquisitions.
Still ahead in the economic calendar, US existing home sales are at 1500 BST, while the US Energy Information Association's crude oil stock count is at 1530 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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