European stocks were mixed at midday on Tuesday, as new UK unemployment data was unchanged signalling weak job creation.
Investors will be eagerly anticipating the US Federal Reserve and Bank of England rate calls this week. The Fed appears very likely to announce its latest cut, while the BoE is expected to keep rates unchanged.
The UK Office for National Statistics reported that unemployment in the three months to the end of October remained unchanged on-month at 4.3%. However growth in average earnings including bonuses picked up to 5.2%, easily beating the FXStreet-cited consensus of 4.6%.
‘A sluggish economy isn’t exactly providing the fuel for job creation and realised fears about potential tax rises in the Budget have made employers cautious,’ warned AJ Bell’s Danni Hewson. ‘These figures are backwards looking, but recruiters have said they are situated in the crow’s nest to provide a sort of early warning system.
‘Their concerns about a potential recession on the horizon were given further weight by the latest PMI data which showed the private sector cut jobs at the fastest rate in four years this December as businesses reacted to tax changes.’
The FTSE 100 index was down 57.51 points, 0.7%, at 8,204.54. The FTSE 250 was down 207.89 points, 1.0%, at 20,605.14, and the AIM All-Share was down 6.05 points, 0.8%, at 723.44.
The Cboe UK 100 was down 0.6% at 823.69, the Cboe UK 250 was down 1.2% at 18,102.93, and the Cboe Small Companies was down 0.2% at 16,034.75.
Bunzl remained the FTSE 100’s biggest loser, down 5.9%.
This was despite its trading statement celebrating another year of ‘significant progress’, but which cautioned that continuing price deflation will have a ‘slight’ impact on annual profitability.
‘It’s rare to see Bunzl doing anything other than plod along so a warning from the distribution company has caught the market by surprise, explained AJ Bell’s Hewson. ’The company says stickier than expected deflation will hit profit and that‘s upset the share price...a deflationary environment can act as a headwind if it has already bought a lot of stock at higher prices and has to sell them for less than originally expected.‘
Chemring was the worst FTSE 250 performer, dropping 10% despite its annual results including profit and revenue rises, as well as higher dividends.
‘At a time when much of its peer group is benefiting from an increase in global security risks and instability, defence outfit Chemring continues to shoot itself in the foot,’ Hewson remarked. ‘While there were several positives in the company’s full-year results, fall in underlying profit margins did not go unnoticed by the market.’
She added: ‘To put its share price underperformance into context, since the invasion of Ukraine by Russia in early 2022, BAE Systems shares have more than doubled, while Chemring is up just 30%.’
Among small caps, Capita fell 8.9%.
It said its 2024 outlook for adjusted operating profit was unchanged, and that it was ‘increasingly confident’ in delivering its medium-term operating margin target of 6% to 8%.
However, it claims to expect around £20 million in additional annual costs due to planned national insurance increases.
Moreover, Hewson said, Capita ‘guided for up to £140 million of free cash outflow in 2024 as a result of lower revenues and a change in approach to managing its working capital. It also guided for a hit to free cash flow in its new year, completing a barrage of bad news that left investors shaking their heads in disappointment.’
Technology Minerals had a much better day, as its shares more than tripled.
The stock was restored to trading in London on Thursday. The firm also announced that its 48%-owned subsidiary Recyclus has signed a black mass offtake deal with Glencore.
In European equities on Tuesday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.2%.
The eurozone’s international trade surplus contracted in October, figures from Eurostat showed, shrinking to €6.8 billion from €9.4 billion a year ago and contracting on-month from €11.6 billion in September.
The monthly reduction was mostly due to a reduced surplus for chemical and related products, which contracted to €19.2 billion from €21.7 billion.
Exports grew annually by 2.1% in October to €254.0 billion, with imports up by 3.2% to €247.2 billion.
The pound was quoted slightly higher at $1.2698 at midday on Tuesday in London, compared to $1.2694 at the equities close on Monday. The euro stood lower at $1.0491, against $1.0504. Against the yen, the dollar was trading lower at JP¥153.81 compared to JP¥154.23.
Stocks in New York were called mostly lower. The Dow Jones Industrial Average was called down 0.3%, the S&P 500 index down 0.2%, and the Nasdaq Composite up 0.1%.
Brent oil was quoted lower at $73.35 a barrel at midday in London on Tuesday from $73.82 late Monday.
Gold was quoted at $2,640.55 an ounce against $2,650.30.
Still to come on Tuesday’s economic calendar, the US releases retail sales, industrial production and the Redbook index reading.
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