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FTSE 100 Live: Wages squeeze continues as unemployment rate dips, Vodafone results

·12-min read
 (Evening Standard)
(Evening Standard)

Earnings are continuing to fall sharply in real terms amid surging living costs, figures from the UK jobs market showed today.

The March unemployment rate edged down to 3.7% and the Office for National Statistics said job vacancies outstripped the number of unemployed people for the first time.

Bonuses in construction and finance mean that total pay is growing faster than prices on average at 7%, but underlying regular earnings are continuing to fall sharply in real terms after annual growth in January to March of 4.2%.

Read more on pay squeeze

FTSE 100 Live Tuesday

  • Tight jobs market points to further rate rises

  • Power generation firm ContourGlobal in £1.75bn KKR deal

  • FTSE 100 higher, Imperial Brands jumps 6%

US retail sales hold steady despite pressure from inflation

Tuesday 17 May 2022 14:41 , Rhiannon Curry

US retail sales grew at a steady rate in April, suggesting demand for goods remains resilient despite rampant inflation.

The value of overall retail purchases increased 0.9%, after a 1.4% gain in March, according to Commerce Department figures released on Tuesday.

Excluding vehicles and petrol stations, sales rose 1% last month.

Andrew Grantham, an economist at Canadian Imperial Bank of Commerce, said: “While the increase will look less impressive after taking price movements into account, today’s data still suggests that the squeeze on household incomes from inflationary pressures isn’t yet having a material impact on discretionary spending.”

In the markets, the Dow Jones opened 204 points higher at 32,427, while the S&P 500 opened 44 higher at 4,052. The Nasdaq Composite also gained 64 points at the opening bell.

Here are the headlines this afternoon:

London-based early stage tech investors in car-selling startup Cazoo and fantasy football digital platform Sorare have topped a global list of the most successful venture capitalists, after a record year for tech investment across Europe.

Employers are struggling to cope with unprecedented labour shortages as job vacancies outstrip the number of people looking for work for the first time on record, new official figures have revealed.

Tuesday 17 May 2022 12:06 , Rhiannon Curry

The FTSE 100 is up 68.6 points this lunchtime, at 7,533.37, as investors reacted positively to news that the UK unemployment rate has dropped to 3.7% in the first three months of the year, its lowest level since 1974.

Imperial Brands is still leading the gainers, up 7.94% today on the back of better-than-expected results for the half year.

In the FTSE 250, Contour Global shares are still up an astonishing 32.37% to 256p after the company announced it had been bought by US private equity firm KKR for 263.6p a share.

The German Dax is up 1.5%, while the French CAC has risen 1.3% during the morning’s trading.

Meanwhile, the pound is worth almost $1.25 and €1.19.

Here are the top stories from this morning:

Elon Musk has stoked speculation he may walk away from his $44 billion deal to buy Twitter after tweeting he would not proceed until he had proof that fewer than 5% of accounts on Twitter were fake or spam.

Vodafone left the City disappointed today as it kept investors waiting for deals and warned of an inflation-driven slowdown.

Employers are struggling to cope with unprecedented labour shortages as job vacancies outstrip the number of people looking for work for the first time on record, new official figures have revealed.

Employers are finding it near-impossible to hire Ukrainianrefugees in the UK because they face a “hostile environment” which prevents them from working, a director of cosmetics company Lush has said.

High-end London offices still in demand despite hybrid working

Tuesday 17 May 2022 11:59 , Rhiannon Curry

Companies have been snapping up new high-end office space at record levels, according to the boss of Landsec, as the great return to the office continues.

The company reported leasing deals for central London office worth £63 million in the year to 31 March at average let prices 4% higher than valuers had predicted.

Overall, Landsec’s offices are now 95.3% full, the company said.

Read the full story.

Elon Musk says Twitter takeover ‘cannot move forward’ until bot numbers verified

Tuesday 17 May 2022 11:43 , Simon Hunt

Elon Musk has stoked speculation he may walk away from his $44 billion deal to buy Twitter after tweeting he would not proceed until he had proof that fewer than 5% of accounts on Twitter were fake or spam.

The billionaire tweeted: “My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of (less than) 5%. This deal cannot move forward until he does.”

In a statement, Twitter said it was “committed to completing the transaction on the agreed price and terms as promptly as practicable.”

Read the full story.

London ‘buy now, pay later’ startup Zilch heads to Miami

Tuesday 17 May 2022 11:40 , Simon Hunt

A London “buy now, pay later” start-up is opening up in Miami as the fintech tries to crack America.

Zilch plans to recruit 100 new employees for the new office, its first in the US.

CEO Philip Belamant said: “With the cost of living going up, and with people paying billions of dollars in fees and interest, we think it’s the perfect time to us to launch a product like ours which eliminates those costs for customers but provides the same benefits.”

Read the full story.

Sir Martin Sorrell back making deals

Tuesday 17 May 2022 11:26 , Oscar Williams-Grut

Sir Martin Sorrell continues to strike deals at a rate of knots despite questions being raised about the speed of expansion at his new business, S4 Capital.

S4’s operating company Media.Monks today announced a merger with US digital marketing agency TheoremOne. The LA-based business works with brands like American Express, AT&T, Intel and Starbucks, and had revenues of $58 million last year. Financial terms weren’t disclosed.

Sorrell said TheoremOne was “a great fit” for S4.

The merger is the first deal announced since the publication of S4’s delayed accounts a little over a week ago. Accounts were delayed after auditors asked for more time to check the numbers. S4 struck around a deal a month last year and reports suggest its rapid growth created problems when it came to drawing up the annual results. Shares have halved since the start of the year.

Analysts at Peel Hunt said: “Our understanding is that the deal was struck prior

to the results being delayed.”

The deal could provide an immediate boost to earnings, Peel Hunt said, adding: “With the price down so much since the start of the year, the shares look attractive.”

S4 gained 8.6p, or 3%, to 294p.

Imperial Brands leads FTSE 100 surge, Victorian Plumbing recovers

Tuesday 17 May 2022 10:31 , Graeme Evans

Income-hunting investors were unable to kick their tobacco habit today as Imperial Brands showed its appeal as a hedge against inflation.

The Bristol-based maker of JPS, Gauloises and vaping brand blu reported half-year earnings and margins ahead of City expectations, while strong cash generation led to a 1% rise in interim dividend to 42.54p a share.

Shares in Imperial, which trades with a forward dividend yield above 8%, surged 6% or 101p to 1813.5p amid further progress in the roll-out of next generation products.

AJ Bell’s investment director Russ Mould said: “The cigarette makers are proving hard to stub out in an environment where their pricing power and resilient demand provides a useful hedge against inflation.”

Imperial’s rally came in a positive session for the London market, with the FTSE 100 index up 44.37 points to 7509.17 as widely-held Barclays, Prudential and Royal Mail lifted 2%.

The heating oil-to-healthcare conglomerate DCC also gained 3% or 158p to 6426p after its annual results showed a 28th year in a row of dividend growth. The 10% rise to 175.78p a share came as annual operating profits improved 11% to £589.2 million.

Other blue-chip risers included Premier Inn owner Whitbread, which gained 54p to 2701p after Deutsche Bank analysts reiterated their “buy” recommendation and 3800p target.

The FTSE 250 returned above 20,000 after a rise of 216.55 points to 20,140.66, with British Gas owner Centrica up another 3% and Wizz Air 4% higher.

Victorian Plumbing got a boost on AIM after it met expectations with a 5% fall in half-year revenues to £133.9 million. The bathrooms retailer, whose adverts feature Changing Rooms star Laurence Llewellyn-Bowen, listed at 262p last June for a valuation of £850 million but is now at 52p despite today’s 1.6p rise.

Britvic profits surge as drinks maker confident it will thrive during a downturn

Tuesday 17 May 2022 10:26 , Simon Hunt

The CEO of soft drink maker Britvic said he expects the company to perform well in a recession, but warned prices across some brands may rise as a result of higher packaging and fruit juice costs.

The maker of Tango and Robinsons squash made profits of £46 million in the six months to March 2022, a 49% increase on the previous year.

Britvic boss Simon Litherland said: “We’re a multi-channel business – if people cut back on drinking out we’ll see a lift in at-home purchases.”

“We haven’t seen any downside at the moment and we remain confident for the future.”

KKR snaps up UK energy company

Tuesday 17 May 2022 09:30 , Rhiannon Curry

KKR has agreed a deal to buy UK-based power generation company Contour Global for around £1.75 billion, adding to its stable of renewable energy companies.

Contour has 138 power plants across 20 countries, with solar, wind and hydro operations, as well as a number run by fossil fuels.

It provides a “compelling platform” for growth, driven by the “changing nature of the energy industry as a result of decarbonisation targets,” KKR said.

The US private equity firm will pay 263.6p a share in cash for the company.

KKR has also recently made a bid for French solar company Albioma SA and Australia’s Spark Infrastructure Group, as the move towards renewable energy sources continues.

Contour’s shares surged 34% at the market open, a record gain, and traded at 258p as of 9am on Tuesday.

FTSE 100 higher, ContourGlobal surges on KKR offer

Tuesday 17 May 2022 09:11 , Graeme Evans

The FTSE 100 index is up 0.6%, led by tobacco and vaping business Imperial Brands after its interim results met expectations and included a 1% rise in dividend to 42.54p a share.

The stock surged 6%, or 102p to 1814.5p, returning the Bristol-based company to near the high for the year seen in February.

Other big FTSE 100 risers included the retail-to-oil conglomerate DCC after its full-year results sent shares up 144p to 6412p. BP, Barclays and Prudential were among the widely-held stocks up by around 2% today.

The FTSE 100 index stood 42.80 points higher at 7507.60, with the fallers board led by Vodafone and consumer goods giant Unilever.

The FTSE 250 index returned above 20,000 after a rise of 0.7% or 145.63 points to 20,069.74.

It was led by power generation company ContourGlobal after its board recommended a £1.75 billion takeover offer from private equity firm KKR at a price of 263.6p a share. ContourGlobal’s share price jumped by a third, or 64.6p to 258p.

Rates rise pressure builds after wages data

Tuesday 17 May 2022 08:57 , Graeme Evans

The wage pressures in the UK economy shown today increase the chances of another hike in interest rates next month.

Sterling this morning lifted 0.6% against the US dollar to above $1.24, reflecting expectations that rates will go up by 0.25% to 1.25% even though Bank policymakers have already made four increases in the battle to control inflation.

Paul Dales, chief UK economist at Capital Economics, said: “Our view that the labour market will remain tight and wage growth will accelerate further even as the economy flatlines or contracts in the next few quarters explains why we think the Bank will have to raise interest rates from 1% to 3% to contain this source of domestic inflationary pressure.”

Vodafone shares fall after results

Tuesday 17 May 2022 08:37 , Graeme Evans

Vodafone shares are down 2% in the wake of the mobile phone giant’s annual results, which showed a 5% rise in underlying earnings to 15.2 billion euros (£12.8 billion).

Service revenues lifted 2.6% to 38.2 billion euros (£32.2 billion), driven by a strong performance in Germany.

Chief executive Nick Read said: "We delivered a good financial performance in the year with growth in revenues, profits and cash flows, in line with our medium-term financial ambitions.”

Shares remain under pressure, however. They dipped 1.75p to 118..3p in a move that erased most of the gains seen yesterday after Abu Dhabi-based telecoms group e& disclosed a near 10% stake.

Vodafone, which continues to pursue a merger of its UK consumer business with Three, warned that inflation is likely to impact its financial performance in the year ahead.

Jobless rate lowest on record as labour market tightens

Tuesday 17 May 2022 08:13 , Graeme Evans

Today’s jobs market figures show that workers saw average total pay increase 4.2% in January to March excluding bonuses. But when adjusted for inflation this represents a decline of 1.2%.

The jobs market also remains tight, with more vacancies than unemployed people for the first time on record. The Office for National Statistics said the unemployment rate in the first three months of the year fell to 3.7%, the lowest reading since 1974.

Paul Craig, portfolio manager at Quilter Investors, said: “While on the face of it such low unemployment may appear to be a positive, it is likely partially as a result of a continued return to the workforce in order to help make ends meet given the current cost of living crisis.

“When combined with the high demand for workers, illustrated by the record high 1,295,000 job vacancies seen in February to April, the labour market is increasingly tightening.”

Earnings growth including bonuses was 7%, which Craig said showed companies seeking ways to support their workers through the cost of living crisis while avoiding committing to inflation-busting pay rises.

He added: “If inflation continues to push wages higher as expected, it could result in an even more challenging situation should wages spiral in the longer term.”

FTSE 100 points higher after mixed US session

Tuesday 17 May 2022 07:38 , Graeme Evans

European markets are poised to open higher, despite another underwhelming session on Wall Street after the Nasdaq fell by more than 1% and the Dow Jones Industrial Average crept into positive territory.

The S&P 500 was slightly lower as the benchmark seeks to avoid posting seven consecutive weekly declines for the first time since 2001. Big fallers in New York included electric car company Tesla, which dropped by almost 6%.

The FTSE 100 index is set to rise 14 points to 7478, according to CMC Markets, as the mood in London continues to steady after last week’s volatile trading.

The top flight initially fell yesterday following weak figures from China’s Covid-hit economy, but later recovered to finish 46 points higher. A rise for Asian markets has helped sentiment, while US futures are in positive territory after yesterday’s mixed session.

Brent crude oil, meanwhile, stood at just above $114 a barrel for the highest level since the end of March.

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