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(Alliance News) - Stocks in London were set to open higher on Tuesday, after the unemployment rate in the UK unexpectedly declined in the three months to April and pay growth sped up.
Unemployment edged down to 3.8% in the three months to April from 3.9% in the three months to March. Market consensus, as cited by FXStreet, had expected unemployment to rise to 4.0%.
Markets were looking ahead to a key US inflation print that could tip the Federal Reserve's interest rate decision on Wednesday.
According to FXStreet-cited consensus, markets are expecting May's consumer price index to show a continued slowdown in US inflation.
Headline consumer price inflation is expected to cool to 4.1% from 4.9% on an annual basis, with core prices expected to slow their annual rise to 5.3% from 5.5%.
"If we don't see a slowdown in core prices, then that might introduce some nervousness that might prompt the Fed to hike again tomorrow instead of the pause that is currently being priced," said Michael Hewson, chief market analyst at CMC Markets.
Markets currently see a 78% chance that the US central bank will hold rates steady on Wednesday, with the balance anticipating another 25 basis point hike, according to the CME FedWatch Tool.
Market predictions have fluctuated over the past week. The 78% expectation of a hold by the Fed is up from 74% on Monday and 76% a week ago.
The US inflation print will be released at 1330 BST.
In early UK corporate news, equipment rental firm Ashtead posted a "record" annual performance and housebuilder Bellway noted a sustained improvement in sales.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 32.61 points, or 0.4%, at 7,603.30
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Hang Seng: up 0.8% at 19,559.40
Nikkei 225: closed up 1.8% at 33,018.65
S&P/ASX 200: closed up 0.2% at 7,138.90
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DJIA: closed up 189.55 points, or 0.6%, at 34,066.33
S&P 500: closed up 0.9% at 4,338.93
Nasdaq Composite: closed up 1.5% at 13,461.92
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EUR: higher at USD1.0779 (USD1.0754)
GBP: higher at USD1.2534 (USD1.2511)
USD: lower at JPY139.40 (JPY139.54)
Gold: higher at USD1,963.26 per ounce (USD1,957.18)
(Brent): lower at USD72.56 a barrel (USD72.71)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
11:00 CEST Germany ZEW indicator of economic sentiment
15:00 BST UK BoE Governor Andrew Bailey questioned by peers on BoE independence
08:30 EDT US CPI
08:55 EDT US Johnson Redbook retail sales index
16:30 EDT US API weekly statistical bulletin
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China's central bank cut a key policy interest rate in a surprise move to boost the country's flagging economy. The People's Bank of China said it was lowering the seven-day reverse repo rate to 1.9% from 2.0%, the first such move since August last year. The seven-day reverse repo is the short-term interest paid by the central bank on loans from commercial lenders, and a decrease in the rate is expected to increase domestic money supply and stimulate spending. Chinese authorities have announced a series of lacklustre economic indicators in recent months, pointing to a slowdown in the country's post-Covid recovery. Consumer prices rose only 0.2% on-year in May, while factory activity shrank last month for the second consecutive month. Beijing has kept interest rates low compared with other major economies, but the near-zero inflation highlights challenges faced by policymakers as they try to stimulate growth.
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The UK unemployment rate ticked downward in the three months to April, while pay growth picked up, figures from the Office for National Statistics showed. Unemployment edged down to 3.8% in the three months to April from 3.9% in the three months to March. Market consensus, as cited by FXStreet, had expected unemployment to rise to 4.0%. In the three months to April, annual growth in average total pay, including bonuses, picked up to 6.5% from 6.1% in the three months to March. This came above market consensus, which expected pay growth to hold steady. Excluding bonuses, annual average earnings growth was 7.2% in the three months to April, compared to 6.8% in the previous three months. This was above expectations of 6.9% growth.
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US President Joe Biden underwent a dental root canal on Monday with little public warning, forcing postponement of all scheduled events, including a meeting with the NATO secretary general. The planned meeting with NATO Secretary General Jens Stoltenberg, as well as an evening diplomatic reception, "will be rescheduled for tomorrow," the White House said. Biden underwent the root canal on a premolar tooth in his lower right jaw, presidential physician Kevin O'Connor said in a statement. Press Secretary Karine Jean-Pierre said the procedure was "successfully completed. The president is doing just fine and he'll certainly be working in the residence this afternoon."
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Donald Trump is due in court on Tuesday to face dozens of felony counts of mishandling US government secrets, in the most serious yet of a firestorm of criminal probes threatening to derail his bid to win back the White House. The former president plans to travel by motorcade for the 25-minute journey from his golf course in Miami to the federal courthouse, where he is expected to deny 37 counts of unlawfully retaining classified documents and obstructing efforts to get them back. The Republican leader is running for re-election, and devoted supporters had already begun hitting the streets on the eve of the hearing – with Miami police bracing for protests of up to 50,000 and prepared for the possibility of violence.
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BROKER RATING CHANGES
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Morgan Stanley starts Rolls-Royce with 'equal-weight'
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Citigroup cuts Admiral to 'sell' (neutral)
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Jefferies raises Hipgnosis Songs Fund to 'buy' (hold)
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COMPANIES - FTSE 100
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Equipment rental firm Ashtead posted a "record" performance in the financial year that ended April 30, with double-digit growth in revenue and profit. Pretax profit rose 30% to USD2.16 billion from USD1.67 billion the year prior, and revenue climbed 24% to USD9.67 billion from USD7.96 billion. The company recommended a final dividend of 85.0 US cents, up from 67.5 cents the year prior. This would take the total payout to 100.0 cents, up 25% from 80.0 cents the year prior. Looking forward, Ashtead expects rental revenue to grow by 13% to 16% in the new financial year. In financial 2023, rental revenue totalled USD8.70 billion.
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British Gas-owner Centrica said its performance over the first five months of the year has been "strong" and that it now expects its performance in the year as a whole to be around the top end of recent analyst expectations. In its Retail segment, adjusted profit in the first half of 2023 is expected to be significantly higher than previous years thanks to the positive impact in British Gas Energy from allowances in the UK domestic default tariff cap relating to costs incurred in prior periods. "As always, uncertainties remain over the balance of the year including the impacts of weather, commodity prices, the economic environment, any changes to regulation or government policy, asset performance and the competitive backdrop for our energy supply businesses," Centrica cautioned.
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COMPANIES - FTSE 250
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Housebuilder Bellway noted a sustained improvement in sales in the five months ended June 4, through the spring selling season, compared to the "challenging" trading conditions experienced in the final calendar quarter of 2022. The overall reservation rate averaged 190 per week, down from 253 per week in 2022, and the cancellation rate edged up to 15% from 12% a year ago. Bellway said, overall, its headline pricing remained firm across its regions. "Bellway has delivered an encouraging trading performance, buoyed by a seasonal uplift through the spring, and the group is on track to deliver full year volume output of around 11,000 homes. While customer interest is currently healthy, the board remains mindful that cost of living pressures and the uncertain path of future interest rates could impact housing demand," it said.
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OTHER COMPANIES
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William Hill-owner 888 Holdings said that it completed the sale of its Lativan business to Paf Consulting. Chair Jonathan Mendelsohn commented: "The sale of the Latvian business marks another positive step in the execution of our integration programme. This sale generates cash proceeds from a non-core market to support our deleveraging plans, as well as enabling reinvestment into our core and growth markets."
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By Heather Rydings, Alliance News senior economics reporter
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