Shares in London and Europe were rising early Tuesday, lifted by figures showing the Chinese economy is rebounding fast from last year’s Covid lockdowns; however the jobs and wages data for the UK painted a mixed picture.
The FTSE 100 index opened up 20.03 points, 0.3%, at 7,899.54. The FTSE 250 was up 20.98 points, 0.1%, at 19,307.88, and the AIM All-Share was down 0.28 of a point at 833.09.
The Cboe UK 100 was up 0.2% at 790.44, the Cboe UK 250 was up 0.1% at 16,930.64, and the Cboe Small Companies was down 0.1% at 13,241.49.
In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.3%.
According to the Office for National Statistics, the UK jobless rate was 3.8% in the three months to February. This was higher than FXStreet-cited market consensus, which had expected the reading to remain unchanged from 3.7% in the three months to January.
Vacancies fell by 47,000 on the quarter to 1.1 million in the period from January to March.
In the three months to February, annual growth in average total pay, including bonuses, was 5.9%, unchanged from the upwardly revised figure in the three months to January. However, it was higher than the market consensus of 5.1%.
Excluding bonuses, average earnings rose 6.6%, also unchanged from the upwardly revised figure last month, and higher than the consensus of 6.2%.
Both paces still trail UK consumer price inflation, which stood at 10.4% in February.
‘It’s an odd situation where employers are still offering pretty decent pay increases to their staff, but the ravages of inflation are rendering them all but useless by the time they hit pay packets,’ said AJ Bell head of financial analysis Danni Hewson.
‘That’s leading to real hardship for some people who are finding the only solution is industrial action, with 348,000 days lost to strikes last month. This is having a knock-on effect to economic growth, which in turn knocks on to business confidence and stymies job creation,’ she added.
Added Daniel Mahoney, UK economist at Handelsbanken: ‘The [Monetary Policy Committee of the Bank of England] will welcome signs of the UK labour market loosening, but the stronger-than-expected earnings numbers highlight how services inflation - which is highly influenced by wage costs - could end up being sticky in the medium term.’
The pound was stronger, as the dollar softened early exchanges in Europe.
Sterling was quoted at $1.2418 early Tuesday, higher than $1.2364 at the London equities close on Monday. The euro traded at $1.0955, higher than $1.0919. Against the yen, the dollar was quoted at JP¥134.36, down versus JP¥134.49.
The market focus for the morning was stronger-than-expected Chinese economic data.
China’s economy grew 4.5% year-on-year in the first quarter, ahead of FXStreet-cited market consensus of 4.0%, rebounding after the end of zero-Covid measures late last year, according to data published by the National Bureau of Statistics. In the previous quarter, annual growth was just 2.4%.
The figures were the first snapshot since 2019 of a Chinese economy - the world’s second-largest - unencumbered by the strict health measures that helped keep the coronavirus in check but battered businesses and supply chains.
China’s retail sales, the main indicator of household consumption, were up 11% year-on-year in March, the biggest bounce since June 2021, accelerating from a 3.5% increase in February. It was higher than FXStreet-cited consensus of 7.4%.
Industrial production in March climbed 3.9% year-on-year, slightly below consensus of 4.0%, but faster than 2.4% in the previous month.
Despite the largely positive Chinese economic data, equities trading in Asia was mixed on Tuesday. In Tokyo, the Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite added 0.2%, while the Hang Seng index in Hong Kong was down 1.0%. The S&P/ASX 200 in Sydney closed down 0.3%.
The prospect of a strong Chinese economy gave a boost to London’s big mining stocks, with Antofagasta and Fresnillo up 2.0% and 1.9%, respectively.
Anglo American rose 1.5%, as it announced it has secured environmental approval for the Los Bronces project in Chile, setting up the next phase of development for one of the world’s largest copper mines.
This project is an expansion of the open pit within the operating site of the Los Bronces copper mine in central Chile. It is targeting higher-grade ore from a new underground section of the mine.
Following the environmental permit approval, Anglo American said it will continue to progress the project through its pre-feasibility stages towards submission for approval by its board in due course.
Gold was quoted at $1,999.76 an ounce early Tuesday in London, higher than $1,990.71 late Monday. Brent oil was trading at $85.20 a barrel, up from $84.99.
Elsewhere in the FTSE 100, Entain was up 2.2%.
The Ladbrokes betting shops owner welcomed a ‘strong start’ to 2023. Total group net gaming revenue, excluding the US, rose 15% year-on-year.
Entain said total online revenue rose 16%, with gaming up 25% and sports betting rising 8%. Retail rose 14%. Including revenue from its US joint venture BetMGM, total net gaming revenue rose 22%, Entain said. BetMGM revenue was up 94% to around $470 million in the quarter, in line with the guidance of $1.8 billion to $2.0 billion for all of 2023.
‘We are delivering both financially and strategically, with a record number of active customers enjoying our products, and we are executing on growth opportunities to further diversify and expand across regulated markets,’ said CEO Jette Nygaard-Andersen.
In London’s midcap index, Mitie Group jumped 13% to 92.20 pence, as it announced a new £50 million share buyback.
For the year ended March 31, the facilities manager raised annual pre-exceptional operating profit guidance to at least £155 million from previous guidance of at least £145 million. Revenue is expected to be ‘slightly above’ the £4.00 billion in the prior year.
‘We are entering the new financial year with a strong order book and a healthy pipeline,’ Mitie said.
Peel Hunt said it ‘confidently’ reiterates is ’buy’ rating and 92p price target on Mitie shares. The broker is raising its financial 2023 forecast for pretax profit, and it said Mitie shares should re-rate as margin improves and the company continues to generate cash.
Budget airline carrier easyJet added 2.8%.
It expects loss before tax to have narrowed to around £415 million from £545 million a year before, as revenue climbed 80% to £2.69 billion from £1.50 billion. Load factor, passenger numbers and seats flown continued to improve during the second quarter.
easyJet noted ‘strong booking momentum’ heading into the summer, with consumers prioritising travel spending and opting for the ‘best value and destination mix’.
Elsewhere, THG shares were down 7.3%, returning some of the 32% gained on Monday on confirmation of a buyout proposal from Apollo Global.
The e-commerce retailer on Tuesday said revenue edged up 2.7% to £2.24 billion in 2022 from £2.18 billion in 2021, but pretax loss ballooned to £549.7 million from £186.3 million. Adjusted Ebitda of £64.1 million was in line with guidance but more than halved from £161.3 million the year before.
In the first quarter of 2023, revenue from continuing operations fell 5.6% to £457.4 million, with total revenue down 8.6% to £469.4 million.
‘Whilst sales growth was negative during the period this was largely as planned, as a result of prioritising higher margin sales,’ THG said. It provided no update on the Apollo takeover proposal.
New York ended in the green on Monday after a see-saw session, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all closing up 0.3%.
‘Investors remain on guard ahead of a flurry of earnings results expected across the economy this week,’ noted Stephen Innes, SPI Asset Management.
In the US on Tuesday, there will be results from Goldman Sachs and Bank of America. Away from the banking sector, pharmaceutical and consumer goods firm Johnson & Johnson and streaming service Netflix release quarterly earnings.
Still to come on Tuesday’s economic calendar, there’s the latest German ZEW economic sentiment reading at 1000 BST.
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