Yahoo Movies FTSE 100 Live: ‘Little doubt interest rates rise again’ after record pay growth, unemployment up to 4.2%
The UK unemployment rate rose to 4.2% in June, it was revealed today, despite expectations that it would remain at 4%.
But markets are paying closer attension to the latest wage growth figures, which showed salaries rising well beyond expectations at 8.2%, or 7.8% when bonuses are excluded. The Bank of England has already said that salaries are rising too quickly to keep inflation under control even when they were rising at much lower rates.
Another key indicator of inflation has come from market research firm Kantar, which has published the latest figures on supermarket price rises. Grocery inflation fell for the fifth straight month, but remained at an extremely high level at 12.7%.
Legal & General, M&S and 888 were also among the companies publishing updates today.
FTSE 100 Live Tuesday
Record wage growth fuels rate rise fears
Property stocks lead weaker FTSE 100
M&S shares surge after profit upgrade
FTSE down further at close
16:55 , Simon Hunt
The FTSE 100 has edged down further, dropping 1.6% to 7,390 at the end of the day’s trading session in London.
Meanwhile, natural gas futures have continued their upward march, settling at 98.43 pence per therm.
“Alarm bells are ringing on UK inflation once more as the latest figures from the Office for National Statistics show record wage growth,” said AJ Bell investment director Russ Mould.
“This builds pressure on the Bank of England and has prompted an increase in sterling and gilt yields, as well as a big fall in UK stocks, as it suggests inflation is becoming increasingly entrenched in the economy.
Here’s a look at your key market data:
Issa brothers’ EG Group sells more stores to bring down debts
16:46 , Simon Hunt
The billionaire Issa brothers have sold scores of convenience stores in the US in the latest step on their bid to bring down debts.
The pair’s retail and petrol forecourt conglomerate, EG Group, today said it had disposed of 63 sites in Kentucky and Tennessee in a deal with US-listed Casey’s General Stores. The terms of the sale were not disclosed.
Zuber Issa, co-Founder and co-CEO of EG Group, said: “EG Group is pleased to have found a new home for some of our Certified Oil and Minit Mart portfolio.
“This divestment will enable both parties to execute their strategic plans, respectively. For EG Group, this divestment also represents another important step in executing our deleveraging strategy.”
US stocks slide amid fears more rate rises ahead
15:26 , Simon Hunt
Stocks fell in the opening minutes of trading on Wall Street as upbeat retail sales figures led to fears further Fed rate rises would be on the cards.
The S&P 500 slid 0.9%, while the Nasdaq was down 0.9%.
James Knightley, Chief International Economist at ING, said: “Higher market interest rates will add to upward pressure on what are already record high credit card borrowing rates and rising auto, mortgage and personal loan rates.
“With households also continuing to run down pandemic-related excess savings, as measured by Fed numbers on cash, checking and time savings deposits, this will act as a brake on growth.”
Light at the end of the tunnel, says PM as inflation set to cool
14:25 , Daniel O'Boyle
The Prime Minister has said there is “light at the end of the tunnel” in the cost-of-living crisis as official figures are set to reveal another slowdown in inflation.
It comes after another record increase in wages placed further pressure on the Bank of England to grapple with inflation and continue with recent increases to interest rates.
The consensus among economists is that the Office for National Statistics (ONS) will reveal Consumer Prices Index (CPI) inflation of 6.7% for July, down from 7.9% in the previous month.
CMA survey says Monzo is UK’s best bank, Virgin Money and RBS the worst
13:54 , Daniel O'Boyle
Monzo is the best bank in the UK and Virgin Money and RBS are the worst, according to a new Government survey.
The Competition and Markets Authority’s latest satisfaction survey, its 11th since the surveys began six years ago, asked customers how likely they would be to recommend their provider to a friend, relative or other business. The survey was based on a sample of 16,046 personal account holders and 18,000 business account holders.
Online-based banks performed well for personal accounts, with Monzo in first place, followed by Starling and First Direct.
FTSE down 1.4%: Lunchtime update
13:14 , Simon Hunt
Midway though the day’s trading session in London, the FTSE is down 1.4%.
Here’s a look at your key market data:
Next year’s English rail fares rise will be below inflation, says Government
13:11 , Daniel O'Boyle
Next year’s rise in English rail fares will be below inflation, the Government has announced.
The Department for Transport (DfT) said the increase will not be as high as the rise in the Retail Prices Index (RPI) for the 12 months to July.
The July RPI figure has traditionally been used to set the following year’s increase in average train fares.
Any increase will also be delayed until March 2024 but the 2023 increase in ticket prices was based on the lower figure of average earnings growth instead.
“Little doubt” Bank raises rates again
12:45 , Daniel O'Boyle
Danni Hewson, head of financial analysis at AJ Bell, says: “More cracks are appearing in the labour market. Unemployment has ticked up by more than had been anticipated as economic uncertainty impacts growth plans and sounds the death knell for wounded companies like Wilko.
“Vacancy numbers keep falling, and looking at July’s payroll data it does appear that softening in the labour market is cooling wage growth.
“But there seems little doubt that interest rates will have to rise again next month and market expectation for a further quarter percentage point hike in November has shot up off the back of today’s jobs data.”
More than four million working days lost since strikes began
12:25 , Daniel O'Boyle
The number of working days lost since the current period of strike action began has passed four million, new figures show.
Some 4.1 million days are estimated to have been lost in labour disputes in the UK from June 2022 to June 2023 – the highest for any 13-month period since July 1989 to July 1990, when 5.0 million were lost.
Data for last month’s strikes by junior doctors, hospital consultants, teachers and rail workers has yet to be compiled.
Financial watchdog to ask MPs about debanking experiences
11:39 , Daniel O'Boyle
British politicians are to be asked to reveal whether they have encountered any problems accessing bank accounts or faced being “debanked”, as part of an inquiry by the UK’s financial watchdog.
The Financial Conduct Authority (FCA) said it is looking into the rules surrounding politically exposed persons (PEPs), which includes MPs.
The regime was thrust into the spotlight after former Ukip leader Nigel Farage revealed that Coutts, which is owned by NatWest Group, had moved to shut down his bank account.
Unemployment rise means “Misery Index” still above 12%
11:10 , Daniel O'Boyle
With unemployment rising to 4.2%, the “Misery Index” — a measure of economic distress invented by American economist Arthur Okun — remains at historically high levels, despite hitting its lowest mark in a year.
The measure adds the rate of inflation to unemployment, to look at the combined effect of two major sources of economic harm.
While inflation has started to come down in recent months, that has been accompanied by a gentle rise in unemployment, thanks in part to higher interest rates making businesses less confident abut hiring.
UK economy defying the ‘moaners and groaners’, Legal & General chief says
10:50 , Daniel O'Boyle
Legal & General boss Sir Nigel Wilson decried the levels of “moaning and groaning” about a UK economy that has proved more resilient than expected over the past 18 months.
He told the Standard there were still plenty of reasons for optimism, despite higher interest rates slowing growth. The economy has outperformed most of last year’s forecasts, with organisations like the Bank of England and IMF no longer expecting a recession this year.
“The economy has been much more resilient than anybody had expected 18 months ago, and yet people are still moaning and groaning,” he said.
The rest is Lineker: he strikes gold as a podcast mogul
10:46 , Daniel O'Boyle
He shoots, and inevitably, he scores. While most of us are happy being competent at one job, Gary Lineker has completed a hat-trick of career triumphs this month. First he was a feared striker and captain of the England football team, then one of the country’s most admired sports presenters as the anchor for Match of the Day. Now Lineker is fast making his name as a media mogul, as content made by his company Goalhanger Podcasts dominate the charts.
Lineker himself is the star of his latest offering, The Rest is Football, exchanging footie banter with fellow ex-pros Alan Shearer and Micah Richards. It quickly became the UK’s most listened-to podcast on its debut last week. But the former Spurs and Leicester star isn’t just the master of ceremonies this time — he co-founded and owns a third share of the firm that produces it.
Goalhanger Podcasts was only created at the start of 2022 but has enjoyed a stratospheric rise since. Even before this latest show, it could boast 17 and a half million downloads per month, largely due to the success of its two flagships, The Rest is History and The Rest is Politics. They have gained an army of loyal fans with a novel format: having seasoned professionals discuss their specialist subjects.
FTSE 100 down more than 1%, Ocado shares up after M&S update
10:29 , Graeme Evans
Rate rise fears today weakened London shares to leave the FTSE 100 index down 1.3% or 98.63 points at a one-month low of 7,408.52.
The downbeat tone was set early on after China revealed below par growth in industrial output and retail sales to continue the run of disappointing July figures.
A move by the People's Bank of China cutting its medium-term lending facility rate failed to have an impact as Hong Kong’s Hang Seng index closed a further 0.8% lower.
The flight from risk in European markets accelerated after record UK wage growth fuelled bets on more interest rate rises and heightened stagflation fears.
Among those hard hit, warehouse group Segro declined 2% or 17p to 714.6p and the Piccadilly Lights owner Land Securities dropped 10.4p to 612.4p.
Their falls erased some of July’s recovery, when an end appeared to be in sight for the rate rises that have made the property sector much less appealing compared with other investments.
Defensive stocks from the utilities industry also felt the rate rise pressure as Severn Trent weakened 2% or 43p to 2354p and United Utilities lost 14.4p to 960.8p.
A shortened FTSE 100 risers board was dominated by beneficiaries from the read-across after today’s profits upgrade by Marks & Spencer.
They included M&S’s joint venture partner Ocado, which lifted 3.8p to 800p, while signs of resilient trading conditions helped Next shares add 26p to 6994p and discounter B&M European Value Retail by 4.6p to 558.6p.
The FTSE 250 index fell 0.5% or 89.68 points to 18,671.75, a performance that included falls of 3.8p to 314p by British Land and 0.6p to 25.54p for shopping centre owner Hammerson.
The economic uncertainty meant no result-day bounce for pipework supplier Genuit, even though it forecast full-year profits towards the top end of City forecasts. Shares were 2.5p lower at 300p.
Grocery price inflation slows for fifth month in a row
10:01 , Daniel O'Boyle
Grocery price inflation slowed down at the second fastest rate since records began over the past month but shoppers still face higher prices across “every supermarket shelf”, figures show.
Analysts at Kantar reported price inflation across grocery shops at 12.7% for the four weeks to August 6, dropping from 14.9% over the previous month.
It is the fifth consecutive decline in the rate of price rises since the figure peaked at 17.5% in March.
Will Bank of England look at signs of wage growth slowing?
09:51 , Daniel O'Boyle
Simon French, chief economist at Panmure Gordon, says the latest wage data should not necessarily push expectations for interest rates any higher.
He said that it’s July payroll statistics that will be new to the Bank, and those show a decline in wage growth.
Pandora UK: Bringing back VAT-free shopping could bring boost to retail sector
09:29 , Joanna Hodgson
The UK boss of Pandora, the world’s largest jewellery brand, has said bringing back VAT-free shopping could offer a significant boost to the retail sector and the economy as a whole.
Rasmus Brix is general manager for the UK & Ireland at Pandora, which has over 200 shops in the UK, including 13 in London.
He told the Evening Standard that such a move (reinstating VAT-free shopping) could help “to offset some of the disruption we’re seeing on high streets as a result of the weather, cost of living crisis and ongoing train strikes”.
M&S shares rally, L&G leads latest FTSE 100 decline
08:46 , Graeme Evans
Marks & Spencer shares are 8% or 17.1p higher after today’s upgrade to 2023/24 profit guidance, meaning the widely-held stock is at its highest level since January 2022 at 221.8p.
The retailer was joined on the FTSE 250 risers board by construction materials supplier Genuit, which rose 3.5p to 306p after forecasting full-year profits towards the top end of CIty forecasts.
Annuities business Just fell 0.7p to 81.3p despite being “highly confident” of comfortably exceeding its 15% operating profit growth target for the full year.
The UK-focused FTSE 250 index fell 89.58 points to 18,671.85, while London’s top flight slid 1% or 76.52 points to 7430.63.
Big fallers included Legal & General, which lost 2% or 5.3p to 227.8p on the back of half-year results. Next benefited from the M&S update with a gain of 42p to 7010p.
FTSE opens lower on rate expectations
08:41 , Simon Hunt
The FTSE 100 has opened lower as unexpectedly high wage growth raised expectations of more interest rate rises.
Here’s a look at your key market data.
‘Labour market shifting to new ground'
08:27 , Daniel O'Boyle
Kate Shoesmith, Recrutment and Employment Confederation deputy chief executive, said: “This is a labour market shifting to new ground and will be one the Bank of England and government will closely monitor because of the direct impact it is having on the economy. The unemployment rate is marginally above most predictions and we’re getting a sense of a loosening jobs market - where the demand for talent in certain sectors remains high, while there is a fall back in demand in other key sectors.
“These issues are deeply intertwined. For example, it’s particularly concerning to see the record high of economically inactive people because of long-term sickness, meanwhile, we continue to see significant problems recruiting and retaining staff in the health and care sectors. We need a fundamental rethink of the models of work in the NHS and beyond.
“The labour market remains tight enough to continue to put pressure on employers by pushing up pay, with the highest regular annual growth rate we have seen since comparable records began in 2001 – but much of this will be down to recent pay deals negotiated and is one to watch closely. Pay is important, but it is not the only thing employers should consider. Today’s workers weigh pay against the whole package, such as flexible working, training, annual leave – and even whether the corporate culture aligns to their personal values. This is why our Overcoming Shortages report last year stressed to employers the importance of working conditions and getting the offer right.”
08:17 , Daniel O'Boyle
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the latest jobs figures suggest the economy could be stuck in a world of stagflation, with fast price rises but little to no growth.
She said: ‘’The blast of cold air from higher interest rates is being felt in the labour market, with unemployment ticking up but the risk is that the growth in wages will continue to fan the fires of inflation.
“With the highest annual wage growth recorded in June since records began in 2001, another rate hike from the Bank of England looks bolted on in September. The pound has crept upwards on expectation that rates will rise again but significant gains are set to be limited given the challenges ahead of the UK economy. Sterling rose by 0.28% immediately after the jobs data was released, rising to $1.272 and also strengthening against the euro, before losing some ground.
“The picture painted by these jobs numbers is adding up to be a stagflation scenario, with prospects of growth slim while inflation risks staying stubborn. Industrial disputes between NHS workers and the government are not helping the inflation battle. The number of people inactive because of long-term sickness has increased to a record high, and with painful waits for treatment not set to be cured any time soon, the fight for labour is set to continue.
“With real wages moving back into positive territory for the first time and surpassing the headline inflation rate, consumer spending is expected to stay more upbeat, which bodes better for companies selling discretionary goods – items we might want but we don’t necessarily need.”
L&G profit beats forecasts, shares lower
08:15 , Graeme Evans
Legal & General today reported a 2% fall in half-year operating profits to £941 million, a performance well ahead of City expectations of around £834 million.
The result was bolstered by new business in the transfer of corporate pension risk, with the institutional retirement division lifting profits by 19% to £471 million amid strong demand in the UK and United States.
L&G’s retail’s arm, which includes workplace savings, annuities, income drawdown and lifetime mortgages, saw a 22% fall in profits to £230 million as a lower contribution from fintech investments offset core insurance operating profit growth of 4%.
Today’s figures are the first under new accounting rules that smooth out the timing of profit recognition but have no bearing on cash flow metrics.
Shares opened 4.1p lower at 229p despite the company remaining on track to deliver its five-year ambitions for the 2020-2024 period. L&G disclosed a 5% increase in dividend to 5.71p a share.
Is the triple lock at risk?
08:12 , Daniel O'Boyle
The latest rise in wage growth will raise questions about the pension ‘triple lock’, which mandates that pensions will always rise at the pace of the fastest of three measures: earnings growth, inflation and a flat 2.5% rise.
Adrian Lowery, financial analyst at wealth manager Evelyn Partners, said: “Average earnings growth excluding bonuses, which had been expected to tick up to 7.4% in the quarter through June from 7.3% in the previous three-month period, is now the highest on records going back to 2001.
“This above-expectations wage growth will be watched nervously at the Treasury as it threatens to add fuel to the triple lock fire. The wages element of the triple lock - annual earnings growth for May to July - won’t be available until next month but this outcome suggests it could be significant. Moreover, strong wage growth is likely to impair the retreat of inflation in the coming months, and the Bank of England recently warned that the pace of wage growth is a threat to its longer-term inflation target of 2%.
“While the consumer prices index for July due tomorrow is widely expected to show a fall in the headline annual inflation rate, there are reported fears in Whitehall that subsequent months could reveal a plateau or even a tick back up in the rate. The inflation reading for September, or a possibly even-more racy wage growth figure, will determine what could be a very substantial rise in the state pension and reignite the debate over whether the triple lock is sustainable.
“The cost of the state pension is already expected to outweigh combined spending on education, policing and defence in the next two years. With neither of the leading parties yet willing to question the affordability of the triple-lock in the run-up up to a General Election, this could intensify the squeeze on the public finances.”
888 slips to loss as it moves away from UK big spenders
08:07 , Daniel O'Boyle
William Hill owner 888 slipped to a loss as UK revenue declined amid stricter regulations to protect vulnerable gamblers, but the business appears to have finally put a chaotic six months in past as it says the latest Gambling Commission probe into its activity will have no impact.
UK revenue was down by 3% to £615.3 million on a like-for-like basis for the business, which bought the country’s biggest high-street bookie William Hill last year. It said this was mostly due to a pivot towards lower-spending punters, as new rules were announced in April to ensure betting operators perform financial checks on those who spend more.
The group made a loss for the year thanks in part to high interest rates, having taken on substantial levels of debt for the acquisition.
The business has had a turbulent year, starting in late January when longtime boss Itai Pazner quit amid an investigation into the company’s anti-money laundering checks in the Middle East.
888 also paid the largest fine in UK gambling history earlier this year, for failings at William Hill that occured under previous ownership.
In June, a group named FS Gaming, including former Entain boss Kenny Alexander, bought a stake in 888, with the aim of making Alexander 888’s CEO.
However, those plans were scuppered when the Gambling Commission said it was reviewing 888’s licence, citing an HMRC bribery investigation into activities that occurred while Alexander was in charge of 888.
When the review was launched, 888 warned its licence was at risk and said it therefore had no choice but to end talks about putting Alexander in charge. With those talks ended, 888 today said it anticipates no impact from the review.
With the group having also paid a £2.9 million fine in GIbraltar, where its business aimed at the Middle East was based, it appears that a line may now be drawn under a turbulent period.
M&S ups profits guidance, food sales surge 11%
07:45 , Graeme Evans
Trading momentum at Marks & Spencer is continuing after the retailer today upgraded profit guidance for the 2023/24 financial year.
It has grown market share in both its clothing & home and food businesses, alongside good progress on the programme to reshape M&S.
The FTSE 250-listed company now expects interim results in November to show a significant improvement against previous expectations, with annual profits now set to be better than the 2022-23 performance.
However, it added: “There remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses.”
Like-for-like food sales grew by over 11% in the first 19 weeks of the financial year, with clothing & home sales up more than 6% despite “subdued growth” online. The level of stock going into the sale period was lower than planned.
M&S shares have risen by about 60% this year, aided by the likely return of dividend payments with November’s half-year results.
Nvidia leads Wall Street tech rebound, FTSE 100 seen higher
07:15 , Graeme Evans
A return to form by Wall Street’s technology sector last night helped the Nasdaq Composite to close 1% higher and the S&P 500 by 0.5%.
Semiconductor firm Nvidia rose 7% after its shares were kept in Morgan Stanley’s “top pick” bracket, a move that boosted confidence in other mega-cap tech names.
The narrow nature of Wall Street’s rally was highlighted by the performance of Dow Jones Industrial Average, which closed Monday’s session broadly unchanged.
The FTSE 100 index finished 17 points lower yesterday as mining companies and Asia-focused stocks were unsettled by the ongoing storms in China’s property sector.
The Hang Seng index and Shanghai Composite traded in the red despite this morning’s unexpected rates cut by the People’s Bank of China but CMC Markets expects London’s top flight to open 14 points higher at 7521.
Unemployment and wage growth both rise faster than expected
07:06 , Daniel O'Boyle
UK unemployment rose to 4.2% in June, ahead of expectations, while soaring wages mean more interest rate pain could be on the way.
Analysts had expected the rate of unemployment to remain at 4%, but the rise suggests that the latest cycle of rate hikes is starting to put Britons out of work.
However, wages are continuing to rise at a pace that the Governor of the Bank of England Andrew Bailey has warned is too fast to keep inflaton under control. Latest figures show wages icluding bonuses were up by 8.2%. Excluding bonuses, wages are up by 7.8%. UK unemployment rose to 4.2%Both figures comfortably beat expectations.
That may mean more interest rate rises are on the way.
ONS director of economic statistics Darren Morgan said: “The number of unemployed people has risen again while the number of people working has fallen back a little. This is mainly due to people taking slightly longer to find work than those who started job hunting in recent months. The drop in those neither working nor looking for work is mainly among those looking after their family or home. Meanwhile the number of people prevented from working by long-term sickness has risen again to a new record.
“Job vacancies have now fallen over a quarter of a million since this time last year. However, they remain significantly above pre-COVID levels.
“Earnings continue to grow in cash terms, with basic pay growing at its fastest since current records began. Coupled with lower inflation, this means the position on people’s real pay is recovering and now looks a bit better than a few months back.”
China in surprise interest rate cut
06:41 , Daniel O'Boyle
The People’s Bank of China surprised markets this mornning with a cut to interest rates, in an effort to kick start an economy that’s been sputtering amid deflation and low domestic demand.
The central bank for the world’s second-largest economy was widely expected to hold rates, but instead lowered them by 0.15 percentage points.
It comes after days of disappointing economic and market news out of China. Yesterday, new fears hit the country’s property sector as shares in the country’s top developer Country Garden plummeted after trading of its bonds was suspended.
Robert Carnell, regional head of research for Asia-Pacific at ING, said: “From a macro perspective, today's policy decisions are somewhat helpful. They will help improve the debt-service ability of cash-strapped local governments and property companies.
“But this isn't a game-changing outcome, and so we doubt that market sentiment will dramatically improve just on this.
“More policy measures will be needed and more will certainly be delivered. The PBoC has not ended the rate-cutting cycle yet, and there will be further iterations of policy rate cuts along the lines of what we have seen today.”
The SSE Composite is down by 1% in Shanghai today, while the Hang Seng Index in Hong Kong is down by 1.25%.
Morning refresh: What you need to know to start the day
Monday 14 August 2023 22:15 , Simon Hunt
Good morning from the City desk of the Evening Standard.
Inflation is set to fall by more than a full percentage point when data is unveiled tomorrow. That’s the view of a number of economists, who say the rate of price rises will have fallen to 6.8% in June, taking inflation to its lowest level since February last year.
But will the news bring welcome relief for mortgage holders by fending off more interest rate rises? Probably not, analysts say, because core inflation, a measure which excludes fuel and food, is set to fall at a much slower pace, and that’s the figure most inside the Bank of England will pay closer attention to.
Here’s a summary of our top headlines from yesterday:
London business growth is slowing rapidly but remains the fastest of any region in the country says latest NatWest business report.
Covent Garden landlord Shaftesbury Capital signs £200 million loan as it juggles debts.
Profits fall by 44% at trading at trading app Plus500 as pandemic-era day trading boom ends, but still announces new $60m buyback.
And finally, the curious story of the fake $1 billion AI investment news that made its way to the London Stock Exchange website.
This morning we’re expecting UK unemployment data, as well as interim results from retirement financial services firm Just Group. In the afternoon, we’ll get data on US retail sales.
