The UK’s unemployment rate is its lowest since 1974 after official figures today showed a surprise drop to 3.6% in the three months to July.
The number of people in employment rose by 40,000 over the previous quarter, but the squeeze on household budgets continued.
Growth in regular pay excluding bonuses was 5.2% in May to July, which when adjusted for inflation over the year meant a fall of 2.8%. Average regular pay growth for the private sector was 6% and 2% for the public sector, the widest gap recorded outside the pandemic.
FTSE 100 Live Tuesday
US inflation figure set to show decline
Tight labour market adds to rate rise worry
City job cuts feared after Goldman Sachs warning
FTSE 100 tumbles as global markets brace for more aggressive US rate hikes after inflation data shock
16:01 , Michael Hunter
London’s FTSE 100 was caught up in a global wave of selling on stock markets after disappointing US inflation data pointed to a longer run for the the Federal Reserve’s aggressive rate hikes.
The last consumer price index issued before the central bank’s September policy meeting was expected to show the first fall since May 2020. Instead, it rose again, by 0.1%, sparking concern that there will be more jumbo-sized increases in rates for longer before the fight against inflation starts to show tangible results.
The UK’s main stock index was down almost 75 points to 7397,0, a fall of 1%. It was led by retailers and housebuilders as fears about persistent inflation echoed around the world, hitting sectors exposed to the potential squeeze on consumer spending that an extended rate tightening cycle involves.
Ocado led the losses, down almost 14% to 684p after it forecast a decline in sales for 2022. Taylor Wimpey, the house builder, was down 4.3% at 106p. Barratt Developments lost 4% to 417p and Next was 3.3% weaker at 5866p.
US stocks slump on downbeat inflation news
14:44 , Simon Hunt
Stocks tanked on the opening minutes of trading on Wall Street as investors were spooked by news of worse-than-expected August CPI data.
The Nasdaq Composite fell a staggering 2.9% after the opening bell, while the S&P opened 1.8% lower.
Tech stocks were among the worse performers, with shares in Meta down 5.7% while shares in Google fell 3.7% and Apple shares fell 2.5%.
Pound slides on disappointing US inflation data
14:12 , Simon Hunt
The pound has slid around 1.5% to $1.1538 against the US dollar amid concerns worse-than-expected US inflation data would lead to more aggressive monetary policy from the Federal Reserve. The Euro dropped 1.1% to near parity with the dollar.
Last week, Sterling dropped to its lowest level against the dollar since 1985.
Daniel Casali, Chief Investment Strategist at Evelyn Partners, said: “Although the August CPI inflation surprised on the upside, there is still some evidence to show that the annual trend is peaking, at least in the near term.
“Importantly for financial markets (and the Fed), surveys of consumers’ inflation expectations are coming down from highs in line with peaking actual inflation.”
Worse-than-expected US inflation data triggers slump in futures
13:43 , Simon Hunt
US inflation levels landed higher than investor expectations today, raising the chances of a 75 basis point rise in interest rates when the Federal Reserve meets next week.
The consumer price index hit 8.3% in August, a 0.1% increase from July, triggering a slump in US stock index futures, with Nasdaq-100 futures down 1.56%.
UK inflationary data will be released tomorrow morning.
Tom Hopkins, Portfolio Manager at BRI Wealth Management, said: “what’s key to note is that Core Inflation (which strips out the volatile food and energy components) has risen more than expected by 0.6% month on month (consensus expectation was 0.3%) This has been led up predominantly by housing and rental price growth.
“The larger than expected rise in core inflation is unlikely to sway the federal reserve from implementing a steep 75 basis point interest rate rise later in September, as inflation remains well above its target. I believe the FED need to see more compelling evidence that inflation is easing for them to change course.”
Google faces £22 billion legal claims over advertising practices
13:31 , Simon Hunt
Google is facing a staggering £22 billion in damages claims over its advertising practices in court cases to be filed in British and Dutch courts.
In a statement, law firm Geradin Partners said: "It is time that Google owns up to its responsibilities and pays back the damages it has caused to this important industry.
“That is why today we are announcing these actions across two jurisdictions to obtain compensation for EU and UK publishers.”
Google have said they will fight the legal action, describing it as “speculative and opportunistic.”
Google parent Alphabet made $209 billion (£178 billion) in advertising revenue in 2021, some 81% of the company’s overall sales.
New York stocks set to rise ahead of last inflation reading before Fed September rate call
12:37 , Michael Hunter
The S&P 500 looks set to open higher in a session likely to be defined by inflation data.
The last reading of the consumer price index (CPI) due before the Federal Reserve’s interest rate setting meeting next week will be published before the start of US trade.
For the August CPI reading, analysts are predicting a month-on-month fall of 0.1%, the first decline since May 2020. That would come as a significant sign that the US central bank’s programme of aggressive rate hikes could be starting to tame inflation, influencing market expectations about when and at what level monetary tightening will peak in the world’s biggest economy.
The numbers are due out at 1.30 p.m. London time, before the Wall Street opening bell at 2.30 p.m. Before the data, futures trade was pointing to an opening gain for the main New York stock index of almost 30 points, taking it to 4157.25, up 0.7% and leaving it on course for its fifth consecutive session of gains.
Trustpilot shares soar as consumers focus on brand reputation
12:03 , Simon Hunt
Shares in Trustpilot soared 22% to 76p this morning after the consumer review service posted a jump in revenues and sounded a note of optimism over sales prospects as consumers prioritise trusted brands amid tightening household budgets.
“Trust is also a valuable commodity in times of financial constraint and we remain confident in our ability to deliver continued growth,” the company said in a trading update.
The company posted sales of $73 million (£62 million) for the first six months of 2022, a 25% increase on the previous year at constant currencies, while bookings, a measure of expected future revenues, grew 22%, led by 27% growth in the UK. Bookings growth in the North America was more muted, at 8%.
Sony Music bows to pressure and quits Russia
11:29 , Simon Hunt
Sony Music is withdrawing from Russia as it bows to pressure from international sanctions.
The Sony Group division, one of the “Big Three” record companies which has signed countless stars including Robbie Williams, One Direction and Harry Styles, said it would transfer the business and musicians to local management.
The company said: “As the war continues to have a devastating humanitarian impact in Ukraine, and sanctions on Russia continue to increase, we can no longer maintain a presence in Russia.”
City job fears grow
09:41 , Simon English
GOLDMAN Sachs raised the prospect of sweeping City job cuts again today, with insiders warning that hundreds could go from the investment bank as soon as next week.
The bank said at results earlier this year that it would cut 5% of staff at the end of the year from a total of 47,000.
The return of the annual performance review, suspended during the height of the pandemic, is a result of falling revenues. There have been far fewer new floats on the stock market this year both in New York and London, starving banks of the fees it needs to pay highly remunerated staff.
The Wall Street Journal says the cull could start soon. Goldman had no comment, but it first raised the prospect of job losses at results two months ago when profits almost halved.
CFO Denis Coleman said then: “We have made the decision to slow hiring velocity.”
Banks chased staff and bid up pay during the worst of Covid as clients urged banks to raise them funds to get through the pandemic.
Lately those clients are sitting on their hands, worried about the Ukraine war and inflation in particular.
Credit Suisse has also publicly warned that it is looking for sweeping cost cuts, seen internally as code for job cuts.
Assuming Goldman and Credit Suisse are typical, many thousands of City jobs could be gone by Christmas.
Goldman CEO David Solomon, who has led calls for bankers to return to the office, said earlier: “"There is no question that the market environment has gotten more complicated and a combination of macroeconomic conditions and geopolitics is having a material impact on asset prices, market activity and confidence.”
Future expects top line results on the back of “encouraging performance"
09:28 , Rhiannon Curry
Publishing house Future, which produces Horse & Hound, New Scientist and Marie Claire magazines, has said its results for the year to 30 September will be at the top end of expectations.
The company said it had experienced good audience growth in the second half of the year, and as a result its consensus for adjusted operating profit for the year is £268.6 million, 37% higher than last year, although it could be as high as £270.7 million.
“The encouraging performance, as set out in the June trading update, has continued,” its latest trading statement said.
Its first half results, which were released in May, showed its pre-tax profits had risen 42% to £81 million already this year, and Future said it expects the good performance to run into the second half.
In May, the company bought women’s fashion platform WhoWhatWear, making it the sixth-largest fashion and beauty publisher in the US.
CEO Zillah Byng-Thorne said the company’s specialist titles and a “relentless focus on execution” had prevailed despite the “challenging macro environment”.
Shares in the company rose more than 5% on Tuesday morning.
FTSE 100 steady, Ocado slides 13%
08:48 , Graeme Evans
Ocado shares have slumped 13% in the FTSE 100 index after the retail division of the warehouse technology business forecast a small decline in sales for 2022. It also warned about cost headwinds, sending shares down 100.4p to 694.8p.
Its food joint venture partner Marks & Spencer also lost 5p to 121.65p in the FTSE 250 index.
The wider London market lacked direction ahead of this afternoon’s inflation figures in the US, meaning the FTSE 100 index was close to its opening mark at 7474.03. The FTSE 250 index fell 33.76 points to 19,480.11.
Big risers in London’s top flight included Burberry with a gain of 27p to 1800p, while leisure group Whitbread improved 37p to 2710p.
Tight labour market fuels rate rise speculation
08:26 , Graeme Evans
Less labour market slack and faster wage growth are likely to have increased the chances of a 0.75% hike in interest rates from the Bank of England next week, particularly against the backdrop of higher core inflation expectations over the medium term.
Oanda’s senior market analyst Craig Erlam said: “It's not often that you see the unemployment rate fall to the lowest in almost 50 years and aren't overjoyed, but that will certainly be the feeling at the Bank of England right now.”
Erlam pointed to today’s decline in the size of the labour force and wage growth accelerating faster than expected to 5.5% when including bonuses.
US inflation to test market progress
07:53 , Graeme Evans
Traders are focused on this afternoon’s US inflation print, which is likely to show the consumer prices index fell to 8.1% in August from 8.5% the previous month.
The outcome is set to have a bearing on the decision making of Federal Reserve policymakers ahead of their next move on interest rates on 21 September.
Last month’s CPI reading fell from 9.1% but hopes that this might herald the slowing of the rate hiking cycle were dashed by Fed chair Jerome Powell, when he told the Jackson Hole symposium of his determination to bring inflation back towards the 2% target.
This means another 0.5% hike in interest rates next week, although a front-loading approach by the Fed leaves another move of 0.75% as an option.
Despite the prospect of more big rises in rates, US stock markets have improved for the past four sessions amid hopes that inflation pressures are near their peak.
The S&P 500 index and Nasdaq were both more than 1% higher last night and the FTSE 100 gained 1.7% yesterday to build on the gains posted on Friday. Consumer-focused stocks were among the biggest beneficiaries.
Broker Liberum said: “Falling natural gas prices and new energy cap policies across Europe have brought some certainty to consumer spending for the coming months, thus restoring demand for retail and entertainment.”
Today’s session is expected to see London traders consolidate most of these gains, with CMC Markets forecasting that the FTSE 100 index will open 15 points lower at 7458.