Financials lead FTSE 100 decline; M&S leaps

Share prices in London opened firmly in the red on Tuesday, following a mixed employment release from the UK and the latest round of weak data from China.

The FTSE 100 index opened down 75.61 points, or 1.0%, at 7,431.51. The FTSE 250 fell 102.94 points, or 0.6%, to 18,658.49, and the AIM All-Share fell 1.7 points, or 0.2%, to 753.25.

The Cboe UK 100 was down 0.9% at 741.33, the Cboe UK 250 was down 0.6% at 16,374.52, and the Cboe Small Companies was little changed at 13,617.75.

The FTSE 100 was penalized by the poor performance of the financial sector in particular. At the same time, the prospect of further interest rate hikes in the UK weighed on the more domestically focused FTSE 250.

In Europe, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.3%.

According to the Office for National Statistics, the UK unemployment rate rose unexpectedly to 4.2% in the three months to June, but wage inflation also rose faster than expected.

“This morning’s numbers didn’t just give the central bank a headache, but a migraine,” said CMC’s Michael Hewson.

Annual growth in average total earnings, including bonuses, accelerated to 8.2% in the three months to June, from an upwardly revised figure of 7.2% in the previous three-month period. The June numbers topped the 7.3% consensus quoted by FXStreet.

“This total growth rate is affected by the one-off NHS premium payments made in June 2023,” the ONS noted.

Nevertheless, excluding bonuses, average wages rose 7.8%, compared to the upwardly revised figure of 7.5% the previous month. The June increase is above the consensus of 7.4%.

Consumer price inflation in the UK was 7.9% a year in June.

“While many people will decry the strength of these numbers and warn of the risk of spiraling wages and prices, they fail to understand that consumer incomes have been squeezed for months and the gap is is finally reduced and is now starting to work in favor of consumers,” added Hewson.

The pound climbed back above the USD 1.27 mark shortly after the index was released. This suggests that the market thinks the Bank of England will be troubled by rising wages, and more likely to keep raising interest rates.

The British pound was quoted at $1.2707 at the start of trading on Tuesday, down from $1.2690 at the close of London stock markets on Monday. The euro was trading at $1.0926, up from $1.0918. Against the yen, the dollar was quoted at 145.73 yen, up from 145.31 yen.

Despite tightening household budgets, Marks & Spencer delivered an encouraging update, sending its shares up 8.3%.

M&S said it now expects its financial year result to show profit growth over the previous year, and its interim results to show a “significant” improvement on previous expectations.

Like-for-like food sales were up more than 11% in the 19 weeks to Aug. 12 as the company invested in quality and “tweaked” the pricing of its premium product lines. Sales of apparel and home products rose more than 6%, with strong growth in stores being offset by more “moderate” growth online.

“The retailer is seen as a bellwether for consumer sentiment, and by raising its earnings outlook, it shows how more resilient shoppers are despite the continuing storm of inflation and higher interest rates,” he said. said Susannah Streeter of Hargreaves Lansdown.

Kantar also released data on the wider supermarket sector.

According to the research body, food price inflation fell by 2.2 percentage points to 12.7% in the four weeks to August 6. Over the same period, overall takeaway food sales rose 6.5%, down from 10.4% last month.

In the FTSE 100, Legal & General was one of the worst performers, falling 3.4% after the publication of its half-year results.

In the first half, the financial services company reported pre-tax profit of £324 million, down 53% from £697 million a year earlier. This was largely due to investment losses of around £617m, with operating profit down just 1.8% from £958m to £941m .

“Legal & General Retirement Institutional] and Legal & General Capital] delivered strong performances, Legal & General Investment Management’s results stabilized and Retail’s performance, although affected by competition in certain areas, was sustained growth in annuity sales and advances in U.S. protection,” L&G said.

L&G increased its dividend to 5.71 pence, from 5.44 pence the previous year, and said it intended to increase the dividend by 5% each year until 2024. The company said that it was on track to achieve its five-year ambitions for the period 2020 to 2024.

Companies in the financial sector were also in the red, with M&G down 2.2%, Segro down 2.4% and Phoenix Group down 2.1%.

Turning to commodities, gold was quoted at $1,904.67 an ounce early Tuesday, down from $1,909.82 on Monday. Brent oil was trading at $86.54 a barrel, up from $86.47.

In Asia, exchanges were mixed. In China, stocks weakened as economic data pointed to further weakness in the Chinese economy. The Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong was down 0.6% at the end of trade.

Chinese retail sales, a key indicator of consumption, rose 2.5% year-on-year in July, the National Bureau of Statistics said, down from 3.1% in June and below expectations. analysts. Additionally, the National Bureau of Statistics said industrial production rose 3.7% in July from a year earlier, compared to 4.4% in June.

These numbers come on top of weak recent data from China and suggest the country may struggle to meet the 5% growth target it has set for the year.

In an attempt to stimulate activity, the People’s Bank of China cut the rate on the medium-term lending facility – the interest rate for one-year loans to financial institutions – from 2.65% to 2. 5%. A cut in the medium-term lending facility rate lowers commercial banks’ funding costs, encouraging them to lend more and boosting domestic consumption.

“Overall, policy measures have fallen short, and investors are waiting for a lot more promise before they are more confident in the economy’s ability to protect itself from recession,” Ms. HL Streeter.

Meanwhile, the Nikkei 225 index in Tokyo closed up 0.6%.

Japan’s economy grew 1.5% in the three months to June, official data showed, beating expectations on the back of strong exports. The average forecast for quarterly growth in the world’s third-largest economy was 0.8%, according to Bloomberg News. The data, released by the Cabinet Office, means the economy grew 6.0% annualized, compared to market expectations for 2.9% growth, giving Japan three straight quarters of growth.

The S&P/ASX 200 in Sydney closed up 0.4%.

In the US, Wall Street ended higher, with the Dow Jones Industrial Average up 0.1%, the S&P 500 up 0.6% and the Nasdaq Composite up 1.1%.

Tuesday’s economic calendar still forecasts US retail sales at 1330 BST.

This article is originally published on zonebourse.com