Stock prices in London were largely on the up on Tuesday at midday, though defensive stocks such as utilities and pharmaceuticals were among the best FTSE 100’s performers, indicating there is still lingering discomfort in markets amid tensions in the Middle East.
Meanwhile, UK interest rate worries were eased by slowing pay growth, although the pound was on the back foot. A weaker pound is a tailwind for the FTSE 100, however, as many of the large-cap benchmark’s constituents are international earners.
The FTSE 100 index added 32.51 points, 0.4%, at 7,663.14. The FTSE 250 was up 55.39 points, 0.3%, at 17,574.78, and the AIM All-Share was down 0.61 of a point, 0.1%, at 686.20.
The Cboe UK 100 was up 0.4% at 765.39, the Cboe UK 250 was up 0.5% at 15,274.60, and the Cboe Small Companies added 0.2% at 12,821.77.
‘Helping to give UK stocks a boost were the latest figures on jobs, with a slowdown in wage growth. That in theory reduces the chances of the Bank of England rushing to put up interest rates again,’ AJ Bell analyst Russ Mould commented.
According to the Office for National Statistics, 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. The data including bonuses were affected by the one-off payments made in June through August to NHS and civil service staff, the ONS noted.
Analysts at ING commented: ‘While wage growth is still much too strong for the Bank of England’s liking, there’s nothing in the latest data that’s likely to push the committee into a rate hike at the November meeting.’
‘Admittedly, this is an unusually thinned-down jobs report, with many of the key numbers, including unemployment, delayed for a week due to quality concerns. Those numbers, when we get them, will still have some bearing on the Bank’s next decision, but committee members have made it abundantly clear that private-sector regular pay growth is the key metric it’s watching – and that number has been released today as planned.’
UK unemployment data, which is customarily released alongside the pay data, comes next week.
Sterling was quoted at $1.2154 early Tuesday afternoon, lower than $1.2194 at the London equities close on Monday. The euro was little changed at $1.0549 compared to $1.0548. Against the yen, the dollar was quoted at JP¥149.58, largely flat against JP¥149.56.
In European equities on Tuesday, the CAC 40 in Paris was down 0.2% and the DAX 40 in Frankfurt was 0.4% lower.
Still to come in the economic calendar, there is a US retail sales reading at 1330 BST.
Ahead of the data, stocks in New York are called lower. The Dow Jones Industrial Average is called down 0.2%, the S&P 500 also down 0.2% and the Nasdaq Composite 0.3% lower.
Focus is also on the US earnings calendar, with Goldman Sachs reporting third-quarter results shortly.
Bank of America was up 0.2% in pre-market dealings in New York. It said total revenue in the third-quarter edged up 2.7% to $25.17 billion from $24.50 billion. Net income increased 10% to $7.80 billion from $7.08 billion.
In London, Rolls-Royce rose 0.8%, 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’.
Melrose Industries added 0.7%. It talked up its Engines business, as the FTSE 100 constituent is confident in meeting its 2025 targets.
The company said it ‘can now confirm’ that the Engines arm’s adjusted operating margin will continue to outperform against previous guidance.
Melrose now expects a full-year 2023 margin of around 24%, instead of the 22% forecast in mid-May.
‘Melrose has full confidence that the 2025 targets will be achieved and current trading makes that more secure,’ the FTSE 100 company said on Tuesday. It added that the ‘biggest single reason’ for the outperformance was continued strong aftermarket demand at high margins.
The firm recently sharpened its focus on the aerospace sector following its demerger of Dowlais, which is composed of Melrose’s former GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses.
Also on the up, water utilities Severn Trent, United Utilities and Pennon added 2.4%, 3.3% and 2.6%. Sentiment towards the sector improved after business plans, which outlined investment plans in the year to come, were well-received.
Investor sentiment towards water utilities had been muted leading up to the announcements earlier in October, amid regulatory worries and woes at peer Thames Water.
It was a generally stronger day for more defensive stocks. Drugmaker AstraZeneca rose 2.1%, British Gas owner Centrica climbed 1.0% and consumer goods maker Unilever rose 1.1%.
Digital 9 Infrastructure jumped 12% as it said it has retained Goldman Sachs International as a financial adviser to support the development of ‘a set of actions focused on maximising shareholder value’.
It said the move followed a consultation with shareholders after some had given feedback about the company’s dividend policy and ‘future direction’.
In late-September, the firm withdrew its dividend target.
Digital 9 is managed by Triple Point Investment Management and invests in assets such as data centres, subsea fibre cables, and mobile phone masts.
Elsewhere in London, THG rose 5.8%. It said its third-quarter was its best quarterly revenue performance in the year-to-date. Third-quarter revenue declined ‘year-on-year’, however.
In the three months that ended September 30, the Manchester-based e-commerce firm said revenue fell 4.4% to £466.5 million, or 2.1% on a constant currency basis, from a year earlier. Revenue in the year-to-date fell 5.5% to £1.42 billion, or 5.7% on a constant currency basis.
THG said its full-year revenue guidance of a flat outcome to 5% fall from a year earlier remains unchanged.
‘[The third quarter] has been another strong quarter of progress across the group, with each division delivering improved performances. The pivots made within each division to ensure they thrive in a high inflation global environment are bearing fruit. The momentum with which we exited [the third quarter] was especially pleasing, with the group returning to positive constant currency revenue growth of 3.2% in September, driven by a strong performance across our Beauty division,’ said Chief Executive Officer Matthew Moulding.
Gold was quoted at $1,924.02 an ounce early Tuesday afternoon, up from $1,921.22 on Monday. Brent oil was trading at $89.93 a barrel, lower than $90.19.
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