Stock prices in London were higher on Tuesday morning, helped by weaker-than-expected UK wage inflation and potential diplomatic developments in the Middle East as US President Joe Biden is set to visit leaders of countries in the region.
The FTSE 100 index opened up 29.76 points, 0.4%, at 7,660.39. The FTSE 250 was up 37.53 points, 0.2%, at 17,556.92, and the AIM All-Share was up 0.63 of a point, 0.1%, at 687.44.
The Cboe UK 100 was up 0.3% at 764.83, the Cboe UK 250 was up 0.3% at 15,238.78, and the Cboe Small Companies was little changed at 12,794.77.
In European equities on Tuesday, the CAC 40 in Paris and the DAX 40 in Frankfurt were up 0.2%.
UK wage inflation data came in cooler than market expectations, figures from the Office for National Statistics showed. Other labour market data, including unemployment figures, is delayed until next week.
In the three months to August, annual growth in average total pay, excluding bonuses, was 7.8%. This was in line with market consensus, as cited by FXStreet. The figure for the previous three-month period was revised upwards to 7.9% from 7.8%.
Including bonuses, average pay growth cooled to 8.1%, which undershot market expectations of 8.3%. It was 8.5% in the three months to July.
‘Signs that wage growth is losing momentum should persuade the [Bank of England’s Monetary Policy Committee] to keep bank rate at 5.25% again next month,’ considered Pantheon Macroeconomics.
The pound retreated following the data. Sterling was quoted at $1.2173 early Tuesday, lower than $1.2194 at the London equities close on Monday.
The euro was little changed at $1.0547 compared to $1.0548. Against the yen, the dollar was quoted at JP¥149.62, up versus JP¥149.56.
In the FTSE 100, Rolls-Royce rose 2.1%, as it announced it is set to axe between 2,000-2,500 jobs as part of a cost-cutting plan, driven by its new chief executive. The company confirmed a report from Sky News, which on Monday said the aircraft engine manufacturer based in Derby is expected to announce plans to lay off around 2,500 staff as soon as Tuesday.
Rolls Royce explained: ‘The new structure will create a more agile business that is better able to serve customers and continue to create and maintain world-class products. It will help Rolls-Royce build enhanced capabilities in key areas such as procurement and supply chain management, ensuring they are as strong as the company’s engineering and technical excellence.’ The cuts aim to eliminate duplication and cut costs, it explained, noting it employs 42,000 people worldwide.
Sky had reported that the cuts will be distributed across its global operations and are likely to affect hundreds of UK staff, citing people close to the situation. Tufan Erginbilgic, who took over as Rolls-Royce’s chief executive at the start of the year, said the firm is ‘building a Rolls-Royce that is fit for the future’.
Rio Tinto fell 0.8% as it reported little change in iron ore production and sales in the third quarter, as it expected iron ore production for 2023 to be slightly higher than in 2022.
The mining company said it continued to expect full-year iron ore shipments for the Pilbara operations to be in the upper half of the original 320 to 335 million tonne range, compared to 322 million tonnes in 2022.
Elsewhere in the FTSE 100, housebuilders Taylor Wimpey and Barratt were down 1.0% and 0.9% respectively, as Persimmon and Bellway fell 1.4% and 2.8% in the FTSE 250.
Bellway reported a mostly weaker annual performance in the year ended July 31. It also warned it expects a ‘material reduction’ in volume output in financial 2024, with just 7,500 or so completions targeted, compared to 10,945 in the most recent year. This is due to its reduced order book and lower reservation rates, it explained.
Digital 9 Infrastructure jumped 10%, as the internet infrastructure investor updated on its shareholder consultation.
‘The board has received feedback from its shareholders on a number of areas including D9’s dividend policy and the future direction of the company. Having considered the shareholder feedback, the board is developing a set of actions focused on maximising shareholder value. To support the board’s assessment, it has retained Goldman Sachs International as lead financial adviser,’ Digital 9 said.
In Asia on Tuesday, the Nikkei 225 index in Tokyo closed up 1.2%. In China, the Shanghai Composite gained 0.3%, while the Hang Seng index in Hong Kong was up 0.7% in late dealings. The S&P/ASX 200 in Sydney closed up 0.4%.
Markets in Asia followed a strong US performance, with sentiment getting a boost from news that US President Joe Biden will visit the region and meet with leaders, in a bid to prevent the Israel-Hamas conflict from drawing in other countries.
The US president’s trip comes as Israeli Prime Minister Benjamin Netanyahu lines up forces on the Gazan border ahead of an expected ground incursion as Tel Aviv retaliates after deadly October 7 attacks by the militants.
Biden will meet Netanyahu on Wednesday, and will also see Jordanian King Abdullah II, Palestinian leader Mahmud Abbas and Egyptian President Abdel Fattah al-Sisi in hopes of finding a way to de-escalate a crisis that threatens the stability of the region.
However, Swissquote Bank senior analyst Ipek Ozkardeskaya warned it was ‘still too early to lower one‘s guard’.
‘The risk of an Israeli offensive remains high, and there is a strong possibility of a sharp decline in appetite if diplomatic efforts fail,’ she explained.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.9%, the S&P 500 up 1.1% and the Nasdaq Composite 1.2%.
Gold was quoted at $1,919.96 an ounce early Tuesday, down from $1,921.22 on Monday. Brent oil was trading at $89.89 a barrel, lower than $90.19.
Still to come in the economic calendar, there’s a US retail sales reading at 1330 BST.
In the US corporate calendar, there will be third-quarter results from Bank of America, Goldman Sachs and pharmaceutical firm Johnson & Johnson.
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