FTSE, European and US stocks down in response to UK unemployment figures and imminent US rate decision. (JOHN BRACEGIRDLE)
Wall Street followed the FTSE 100 (^FTSE) and European stocks lower on Tuesday as investors awaited the next interest rate decision by the Federal Reserve. Markets are also readying for Wednesday’s release of the consumer prices index for May, alongside the conclusion of the Fed’s two-day policy meeting.
It also came as the UK unemployment rate unexpectedly climbed to its highest level in two and a half years.
According to the Office for National Statistics (ONS), the rate rose to 4.4% from February to April this year, up from the previous figure of 4.3% and the highest since September 2021.
The number of people in work has fallen by 139,000 to 32.97 million. Meanwhile, wage growth also remained strong, with regular earnings (excluding bonuses) rising at an annual pace of 6%.
Yael Selfin, chief economist at KPMG UK, said: "Overall, today’s data are unlikely to warrant an immediate shift in policy from the Bank of England. We expect the MPC to stay put at its June meeting and reassess the incoming data flow over the summer before it embarks on cutting interest rates."
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World Bank raises global economy growth forecast
The World Bank has upgraded its outlook for the global economy, estimating that it will expand by 2.6% this year on the strength of sustained growth in the US.
This was an increase from the 2.4% growth for 2024 it had predicted in January, matching 2.6% expansion last year.
The agency warned that global growth remains sluggish, and that the poorest countries are struggling under the weight of heavy debts and high interest rates. It added that increased trade barriers endanger prosperity worldwide.
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FTSE 100 on track for worst day since April
The FTSE is on track for its worst day in almost two months, having fallen more than 1% on the day. It is so far the biggest one-day drop since 16 April.
The biggest faller is miner Antofagasta, which is down 4.2% amid falling iron ore and copper prices.
European stock markets have also dropped deeper into the red, amid political turmoil in France.
In the currency markets, the euro sunk to its lowest level in around six weeks, adding to Monday’s losses after Emmanuel Macron called a snap election after a significant defeat by the far-right in the EU vote.
LaToya Harding
OPEC trims estimate for oil demand growth
OPEC has trimmed its estimate for oil demand growth in the first quarter of 2024, but is maintaining its forecast for this year as a whole.
In its latest monthly report, the forecast that world oil demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025, the same as a month ago.
OPEC lowered its estimate of total demand in the first quarter of this year by 50,000 bpd to 103.51 million bpd, but increased its forecast for the second quarter by 50,000 bpd, meaning no change in the overall forecast.
Opec said the stability in the services sector would support demand for energy, explaining:
“It is projected to be the main contributor to the economic growth dynamic in the second half of 2024, particularly. supported by travel and tourism, with a consequent positive impact on oil demand.”
🔴 OPEC revised its Q1 2024 total oil demand forecast to 103.51 million BPD, down by 50,000 BPD. Q2 2024 forecast was raised by 50,000 BPD. The global services sector is expected to drive economic growth in the latter half of 2024, led by travel and tourism. #OPEC#OilDemand
The lifetime allowance was the limit someone could build up in their pension without attracting a tax charge. Before it was abolished it sat at £1,073,100 for the majority of people and was widely criticised as an unnecessary complication to people’s retirement planning given there was already an annual allowance limit on contributions in place.
However, no sooner had chancellor Jeremy Hunt sat down after giving his speech then Labour announced they would reintroduce it should they win the general election.
The reason given was that the removal would be to the benefit of higher earners at a time when many people were battling against the cost-of-living crisis.
A new house price forecast by peer-to-peer real estate investment platform, easyMoney, reveals that recent optimism in the UK property market could be well-founded, as it predicts house prices to grow by an average of 6.3% by the end of 2025.
Recent months have seen house prices falling in the UK. The Gov UK House Price Index shows that in August 2023, the average home sold for £285,862, before falling every month through to February 2024 when the average stood at just £280,673.
This period of consistent decline spurred headlines of housing market doom and gloom in the national media, fuelled by various industry experts, such as Lloyds Bank, Rightmove and Zoopla, all warning of price drops between -1% and -4% before the end of 2024.
In November 2023, Savills joined the conversation by predicting prices would fall by -3% by December of this year. However, the estate agency giant has recently chosen to update its forecast to predict that prices will actually grow by 2.5%.
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Moody’s warns of French credit downgrade
Oradour-sur-Glane, southwestern France, on June 10 2024. French President Emmanuel Macron visiting the ruins of the village of Oradour-sur-Glane, southwestern France, on June 10 2024. This year marks the 80th anniversary of the Oradour-sur-Glane massacre. On June 10, 1944, just four days after the Allied forces landed on the Normandy coast on D-Day, 643 inhabitants, including 247 children, were massacred in the tranquil village of Oradour-sur-Glane in southwestern France, by German Waffen-SS soldiers belonging to the 2nd SS Panzer Division (ABACAPRESS, Abaca Press)
President Macron took everyone by surprise yesterday, dissolving the French parliament and calling for new legislative elections at the end of the month following last Sunday’s results.
This adds significant political uncertainty in the region as investors now see a clear possibility of having far-right leader Marine Le Pen as the next Prime Minister.
Ratings agency Moody’s has warned that Macron’s move could lower France’s credit score because it raises the risk of “political instability”.
In a note to clients, Moody’s analysts said: “The outlook, and ultimately the ratings, could move to negative if we were to conclude that the deterioration in debt affordability – which we measure as interest payments relative to revenue and GDP – will be significantly larger in France than in its rating peers.”
LaToya Harding
Unite: Workers need more rights to help wages catch price rises
Unite the Union has said on Tuesday that workers need more rights to help wages catch up with price rises
Sharon Graham, Unite general secretary, has called for Labour to be "serious about making work pay".
Commenting on today's employment and earnings figures, Graham said:
“We have a long way to go before wages catch up with the huge price rises inflicted on workers over the last two years.
“The outgoing Conservative government will not be missed, but if Labour is serious about making work pay, it is going to have to deliver on collective bargaining.
"Giving workers the power to negotiate over pay and conditions at the place of work, is the only tried and tested method of driving up falling wages.”
LaToya Harding
US dollar stabilises as pound rises against euro
The US dollar stabilised against other major currencies in early Tuesday trading, staying close to the four-week high reached on Monday.
The greenback's surge followed Friday's jump in Treasury yields, triggered by the unexpectedly strong US jobs report.
Ricardo Evangelista, senior analyst at ActivTrades, said:
"The substantial number of new jobs created in May underscored the resilience of the American economy, creating headroom for the Federal Reserve to maintain rates at their current high levels for an extended period.”
“With a US rate cut looking increasingly distant, traders are now focused on tomorrow's release of US inflation figures.”
“A surprise in either direction could significantly impact the US dollar as traders quickly adjust their expectations for the Fed's monetary policy.”
Meanwhile, the pound hit a new 22-month high against the euro, climbing above €1.185 against the single currency. This was a gain of 0.25% — the highest level since August 2022.
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Manifesto pledges 2p national insurance cut
Britain's Prime Minister and Conservative Party leader, Rishi Sunak, delivers a speech to launch the Conservatives' general election manifesto in Silverstone, England, on Tuesday June 11, 2024, in the build-up to the UK general election on July 4. (Benjamin Cremel, Pool Photo via AP) (Benjamin Cremel, Associated Press)
The Conservatives’ manifesto commits to a further 2p national insurance reduction, to 6%, as part of a drive to eliminate the employee rate altogether.
The Conservative Party manifesto pledges to “cut tax for workers by taking another 2p off employee national insurance”, adding: “The next step in our long-term ambition (is) to end the double tax on work when financial conditions allow.”
It adds they want to cut taxes to support the self-employed by “abolishing the main rate of self-employed national insurance entirely” by the end of the next Parliament.
LaToya Harding
Raspberry Pi soars on first day of trading
Raspberry Pi shares jumped on its first day as a public company, offering a boost to London’s market for new stock listings.
The stock traded at 360p each at the open, above its initial public offering (IPO) price of 280p, gaining as much as 36%.
The Cambridge-based company, which makes low-cost computers popular with amateur coders and teachers, had a market capitalisation of about £542m after pricing the IPO at the top end of its range.
The small deal has been seen as a boost for London, which has fallen behind in this year’s revival in listings in Europe.
Dan Coatsworth, investment analyst at AJ Bell, said the float proves the UK can attract tech flotations:
“Investors of all shapes and sizes have feasted on a slice of Raspberry Pi in what is the most significant IPO for the London market for a long time. It may only fall into smaller company territory, but this IPO is big from a strategic perspective.
“It shows the UK is open for business to technology flotations and that investors are hungry for companies of any size if they tick the right boxes. There is a widely held view that tech companies only float in the US where they can potentially get a higher valuation. Raspberry Pi is proof that the UK can still compete against the likes of the Nasdaq and attract home-grown champions.
“Raspberry Pi is a profitable, established name and not reliant on the ‘jam tomorrow’ story that often props up a lot of tech IPOs. It has a large community of users; it makes money rather than simply being a bright idea that is not yet commercialised; and there is a strong social angle as Raspberry Pi has education built into its business model.
“The UK market is woefully under-represented in tech names and hopefully Raspberry Pi’s IPO success will open the flood gates for others in the sector to also float here. If the London Stock Exchange wants a new posterchild for how IPOs should play out and to attract others onto the market, Raspberry Pi is the one to hold up high.”
LaToya Harding
UK mortgages in arrears rise
The number of UK mortgages in arrears has risen to a seven-year high, new Bank of England data has shown.
Some 1.28% of loans were in arrears in the first quarter of this year, up from 1.23% in the previous three months.
It is the highest reading since the fourth quarter of 2016, suggesting more households are struggling to meet their mortgage payments due to high interest rates.
The value of outstanding mortgage balances with arrears increased by 4.2% from the previous quarter to £21.3bn – a 44.5% increase compared with a year earlier. This is the highest reading in almost a decade, since the third quarter of 2024.
Simon Gammon, managing partner at Knight Frank Finance, said:
“The value of mortgage balances in arrears has surged as household finances have come under pressure from both higher mortgage rates and the rising cost of various goods and services.
"This is serious for people struggling to pay their mortgage, but it doesn’t yet present a systemic risk to the housing market. The proportion of the total loan balances in arrears is still relatively low at 1.28%, though Bank of England policymakers will be watching this data closely. New arrears cases actually dipped a little during the quarter, which suggests the situation may be stabilising.
“Mortgage rates are currently trading sideways and barring any nasty surprises, should continue easing once the timing of the Bank of England’s first cut to the base rate becomes clearer.
"Anybody concerned about falling behind on their mortgage payments should contact their lender as early as possible. The lenders have received strict instructions from regulators to offer forbearance, whether via extending mortgage terms or temporarily switching to interest only payments.”
LaToya Harding
Sunak to announce tax cuts in bid to rescue election campaign
Rishi Sunak will try and bolster his flagging election campaign today with the launch of the Conservative manifesto.
Tax cuts and an attempt to appeal to first-time buyers will likely form the backbone of the Tory's pledges.
It has been reported he will promise to cut national insurance by 2p, give 100% relief on capital gains tax liability for landlords who sell to their existing tenants, abolish stamp duty up to the value of £425,000 for first-time buyers; create a “new and improved” Help to Buy scheme.
The announcement, at 11.30am at Silverstone race track, comes after a torrid few days for Sunak in which he was roundly criticised for skipping out of the 80th D-day commemorations early. One report by the Guardian has suggested some right-wing Tory MPs are so disillusioned with the PM that they have threatened to launch their own 'rebel manifesto' if Sunak's offering falls flat.
Bus and train operator FirstGroup (FGP.L) hiked its dividend by 45% after a jump in annual profits, despite revenues falling slightly over the year.
FirstGroup posted a 27% jump in underlying operating profits to £204.3m for the year to March 30 – though this was helped higher by an extra week’s trading and the receipt of higher variable fees in First Rail than the previous year.
The rise came despite revenues edging lower to £4.72bn from £4.76bn.
FirstGroup said it was mindful of a potential renationalisation of National Rail contracts as a result of Labour winning the upcoming election.
FirstGroup warned:
“A change of UK government could lead to policy changes resulting in the renationalisation of the National Rail contracts within the First Rail division as the expiry dates of our various agreements with the Department for Transport are reached.”
The company runs three major UK train operating companies - Avanti West Coast, Great Western Railway and South Western Railway - as well as two open-access passenger rail services, Hull Trains and Lumo.
LaToya Harding
Apple falls as Elon Musk criticises its AI approach
Investors were not impressed by Apple’s (AAPL) 2024 Worldwide Developers Conference (WWDC), where the tech giant unveiled 'Apple Intelligence' — a suite of new generative AI features set to be included in iOS 18, iPadOS 18 and macOS Sequoia later this year.
The stock was lower in pre-market trading after finishing the session in the red as the iPhone maker tried to show worried investors that it is not slipping behind on AI.
As part of its generative AI announcements on Monday, Apple said that alongside its new Apple Intelligence system that will allow users to access generative AI-powered tools almost anywhere within their devices, it would give users the option to send a query to ChatGPT to take advantage of its own spectrum of knowledge.
However, billionaire Elon Musk has threatened to ban the use of Apple devices at his companies if Apple integrates OpenAI’s ChatGPT into its iPhone, iPad and Mac operating systems.
“If Apple integrates OpenAI at the OS level, then Apple devices will be banned at my companies. That is an unacceptable security violation,” Musk said on X.
“They’re selling you down the river. Apple using the words ‘protect your privacy’ while handing your data over to a third-party AI that they don’t understand and can’t themselves create is *not* protecting privacy at all,” he added.
LaToya Harding
Heathrow Airport breaks passenger record
Heathrow has broken its passenger record, with 81.5 million people travelling through its terminals in the year to the end of May.
This was an increased from the 71.6 million passengers in the previous 12 months.
The airport saw double-digit year-on-year percentage growth for routes connecting the airport with other parts of the UK and Europe, as well as North America and the Asia/Pacific region.
It also has its busiest ever May with 7.2 million passengers, compared with 6.7 million in the same month in 2023.
Thomas Woldbye, Heathrow chief executive, said:
"We have a winning team at Heathrow which has proven that we have put COVID firmly behind us.
"Thanks to their extraordinary efforts we are now giving record numbers of people the chance to connect smoothly with the world.
"Supporting 81 million journeys doesn’t just help families to make wonderful holiday memories, importantly it is about the vital trade and business links a hub like Heathrow creates for the UK’s economy."
LaToya Harding
Oil holds biggest gain since March ahead of OPEC report
Krumvir, Czech Republic. 05th June, 2024. Drilling rig Bentec 350 of the mining company MND in Krumvir, Hodonin region, Czech Republic, June 5, 2024. Czech deepest gas well is drilled in Krumvir by company MND. Credit: Vaclav Salek/CTK Photo/Alamy Live News (CTK, CTK)
Oil prices held the biggest jump since March ahead of an upcoming OPEC market report.
Brent Crude (BZ=F) traded below $82 a barrel after surging 2.5% on Monday, while West Texas Intermediate was near $78.
It comes as the OPEC report will be followed by a Short-Term Energy Outlook from the US later on Tuesday, and a monthly release from the International Energy Agency (IEA) on Wednesday.
Crude rallied on Monday as traders bought the dip after the biggest weekly loss since early May. The selloff prompted the OPEC and its allies to clarify that it could pause or reverse production changes if needed.
Oil has moved generally lower since early April on concerns about demand and swelling supply from outside of OPEC. Output from Russia last month stayed above a level the country had pledged to OPEC+, even as it made the deepest cuts in over a year.
Traders are “looking beyond the higher-for-longer rate narrative from the Fed,” said Yeap Jun Rong, market strategist with IG Asia Pte. “Market participants are hoping to tap on some optimism around upcoming summer demand.”
LaToya Harding
China card payments market to reach nearly $20tn
The Chinese card payments market is expected to grow by 3.7% to reach CNY141.1 trillion ($19.9tn) in 2024, supported by a constant consumer shift towards non-cash payments.
This is according to GlobalData, which also revealed that card payments value in China reached CNY136.0 trillion ($19.2tn) last year, a healthy compound annual growth rate of 3.8% during 2019-23.
Among the card types, debit cards are preferred over credit and charge cards, accounting for a 59.9% share of the overall card payment value in 2023.
Debit cards are increasingly being used for payments, especially low-to-medium value transactions. This has been driven by rising consumer awareness, banks offering contactless debit cards, and the expansion of the country’s POS network.
Shivani Gupta, senior banking and payments analyst at GlobalData, said:
“China is the world’s largest payment card market in terms of transaction value, well ahead of developed countries such as the US.
Chinese consumers are increasingly adopting payment cards, spurred by a strong banked population, government initiatives to push digital payments, rising consumer preference for electronic payments, and the expansion of payment acceptance infrastructure in the country.”
LaToya Harding
Wages rise faster in public sector than private sector
The ONS also revealed that annual average regular earnings growth for the public sector came in at 6.4% in the February to April period.
For the private sector, total regular (ex-bonuses) pay rose by 5.8%, the slowest rate since April to June 2022 (when it was 5.4%).
Annual average total earnings growth for the public sector was 6.3% and was 5.8% for the private sector.
The ONS added:
"In February to April 2024, the finance and business services sector saw the largest annual total pay growth at 6.9%. The construction sector saw the smallest annual total pay growth across sectors, at 2.1%.
LaToya Harding
BoE unlikely to be impacted by jobs data
Andrew Bailey, Governor of the Bank of England, speaks during the Bank of England Monetary Policy Report press conference at the Bank of England, London, Thursday May 9, 2024. (Yui Mok/PA via AP) (Yui Mok, Associated Press)
The Bank of England is set to announce its next interest rate decision on 20 June but according to economists, today's jobs report is unlikely to impact the decision.
Yael Selfin, chief economist at KPMG UK, said:
"Wage growth remained elevated in April as the 10pc hike in the National Living Wage was enough to temporarily arrest the downward momentum in pay.
"Based on today’s release, we estimate that the rise in the National Living Wage boosted the overall level of pay by around 0.1%, although the current headline rate somewhat underestimates the impact because it is reported as a three-month average.
"Overall, today’s data are unlikely to warrant an immediate shift in policy from the Bank of England. We expect the MPC to stay put at its June meeting and reassess the incoming data flow over the summer before it embarks on cutting interest rates.
LaToya Harding
Vacancies fall as real wages rise
Sticking with the employment data out today...
The number of vacancies in March to May 2024 came in at 904,000, a decrease of 12,000 on the previous 3 months.
This is down by 156,000 from a year before, although they remained 108,000 above their pre COVID-19 levels.
Meanwhile, real wages increased at their fastest pace since 2021. Adjusted for CPI inflation, total pay (including bonuses) grew by 2.7% per year in February to April 2024, which is the fastest rate since July to September 2021 when it was 3%.
Regular pay (which excludes bonuses) rose by 2.9%, the fastest growth since June to August 2021 (when it was 3.4%).
LaToya Harding
UK unemployment rate rises to 4.4%
The UK unemployment rate unexpectedly climbed to its highest level in two and a half years.
According to the Office for National Statistics (ONS), the rate rose to 4.4% in February to April this year, up from the previous figure of 4.3% and the highest since September 2021.
The number of people in work has fallen, by 139,000, to 32.97 million.
Wage growth also remained strong, with regular earnings (excluding bonuses) rising at an annual pace of 6%.
The ONS said:
"This month's figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong."
We’ve published the latest UK labour market figures.
Headline indicators for the UK labour market for February to April 2024 show:
• employment was 74.3% • unemployment was 4.4% • economic inactivity was 22.3%
— Office for National Statistics (ONS) (@ONS) June 11, 2024
LaToya Harding
Asia and US stocks
Stocks in Asia were mostly lower overnight as investors weighed up the implications of fresh political uncertainty in European markets after right-wing gains in the EU parliament elections and a snap poll in France.
The Nikkei (^N225) rose 0.25% on the day in Japan, while the Hang Seng (^HSI) fell 1.1% in Hong Kong.
The Shanghai Composite (000001.SS) was 0.8% down by the end of the session having been shut on Monday, while the yuan hit a seven-month low.
Across the pond on Wall Street, the S&P 500 (^GSPC) and the Nasdaq Composite index (^IXIC) managed to mark their second record closing highs in four days.
The S&P 500 gained 0.3%, reaching 5,360.79, and the Nasdaq Composite advanced 0.4%, closing at 17,192.53. Meanwhile, the Dow Jones (^DJI rose 0.2% to 38,868.04.
The yield on benchmark US 10-year notes rose to 4.469%, from 4.428% late on Friday.
LaToya Harding
Coming up...
Good morning, and welcome back to our live markets blog. Here we will be taking a look at what's moving markets today, and what's happening across the global economy.
Eight years ago on Sunday, we went to vote in the Brexit referendum. Let’s not forget that most of our rulers never wanted it in the first place. It only happened because of the campaigning of Nigel Farage and Ukip and the determination of a bunch of Tory MPs like Sir Bill Cash. It became the largest act of democracy, and indeed the largest vote for anything, in British history.
It has begun. While Europe has been obsessing over elections in France and Britain, and officials in Brussels are haggling in back rooms over who gets the top jobs in the EU, something far more important has been happening. A full-scale trade war has started with China.
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CNN’s Chris Wallace sits down with Judy Sheindlin, who provides her thoughts on the legal cases involving former President Trump. Watch the full episode of “Who’s Talking to Chris Wallace,” streaming June 21 on Max.
Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100 share I'd buy right now. The post 1 heavyweight FTSE 100 share I’d buy as London retakes its crown appeared first on The Motley Fool UK.
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