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London open: Stocks rally despite weak UK jobs data

By Michele Maatouk

Date: Tuesday 11 Aug 2020

London open: Stocks rally despite weak UK jobs data

(Sharecast News) - London stocks rose in early trade on Tuesday, tracking solid gains for the Dow overnight and amid stimulus hopes, as investors shrugged off the latest UK employment data.
At 0845 BST, the FTSE 100 was up 1.1% at 6,116.92.

Spreadex analyst Connor Campbell said: "With the Dow Jones gathering steam last night as investors focused on Trump's controversial 'aid'-extending executive orders, the European markets exploded out of gate on Tuesday morning.

"Specifically, this meant the FTSE could ignore the latest jobs data out of the UK.

"Choosing not to linger on the US-China tensions - the latest development in which was Beijing slapping sanctions on the likes of Ted Cruz and Marco Rubio - the Dow Jones is aiming to add another 150 points this afternoon. That would leave the Dow at 27,930, its best price since late-February, and around 1,500 points away from its all-time highs."

Hopes of further stimulus were also helping to boost markets after Bank of England Deputy Governor Dave Ramsden said in an interview with The Times that quantitative easing would be accelerated if the British economy slows.

Market participants were digesting the latest figures from the Office for National Statistics, which showed that employment fell at its fastest rate in more than a decade between April and June, while wages shrank as the Covid-19 pandemic took its toll.

Employment declined by 220,000 on the quarter, marking the largest quarterly fall since the wake of the financial crisis in 2009. The figures also showed that a further 81,000 people fell off company payrolls last month, giving a total of 730,000 since March, when the coronavirus lockdown began.

Meanwhile, between January to March and April to June, the total actual weekly hours worked fell by a record 191.3 million, or 18.4%, to 849.3 million hours. This was the largest quarterly decline since estimates began in 1971, with total hours dropping to its lowest level since September to November 1994.

The unemployment rate was unchanged in June at 3.9% versus expectations of an increase to 4.2%, but this was just a reflection of the fact that more people gave up looking for work. Average earnings excluding bonuses were down 0.2%, while earnings including bonuses were 1.2% lower compared to expectations for a 1.1% fall.

ONS deputy national statistician for Economic Statistics Jonathan Athow said: "The labour market continues recent trends, with a fall in employment and significantly reduced hours of work as many people are furloughed.

"Figures from our main survey show there has been a rise in people without a job and not looking for one, though wanting to work. In addition, there are still a large number of people who say they are working no hours and getting zero pay.

"The falls in employment are greatest among the youngest and oldest workers, along with those in lower-skilled jobs.

"Vacancies numbers began to recover in July, especially in small businesses and sectors such as hospitality, but demand for workers remains depressed."

Ruth Gregory, senior UK economist at Capital Economics, said: "Overall, we doubt the apparent stability in the ILO unemployment rate will last long. Indeed, with further rises in unemployment in the coming months all but inevitable as the furlough scheme unwinds, this is just the lull before the storm.

"Our forecast that the unemployment rate will peak at 7% in mid-2021 and remain above its pre-pandemic level of 4% until the end of 2022, suggests that the economic recovery will be slow going."

In corporate news, InterContinental Hotels was on the rise despite suffering a $233m (£178m) loss in the first half as occupancy at its hotels plunged during the Covid-19 crisis.

Plus500 surged to the top of the FTSE 250 as the trading platform more than tripled its interim dividend and reported soaring first-half revenue and profit driven by "unprecedented" volatile markets during the pandemic.

Cineworld gained amid takeover speculation, after a US judge granted the government's request to end the Paramount Decrees, a set of antitrust rules from the 1940s and 1950s that banned film studios from owning theatres.

Online software development and gaming company Gamesys rallied as it declared a maiden dividend and said full-year gaming revenue and adjusted earnings were set to be ahead of its previous expectations following a strong performance in the first seven months of the year.

On the downside, housebuilder Bellway was a little weaker after it reported a fall in the number of homes constructed as the coronavirus lockdown forced a halt to sales. It also deferred a dividend but said it was "keen" to reinstate payouts if there was no second wave of the pandemic.

Oilfield services provider Petrofac tumbled as it posted a first-half loss and said it won't pay a dividend.

Pizza delivery company Dominos was also in the red after it reinstated a deferred dividend but said the risk of a second lockdown meant an interim payout would be suspended as it reported a fall in underlying profits due to Covid-19 costs.

Market Movers

FTSE 100 (UKX) 6,116.92 1.10%
FTSE 250 (MCX) 17,871.42 0.83%
techMARK (TASX) 3,873.74 0.64%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 211.60p 4.91%
Rolls-Royce Holdings (RR.) 276.60p 4.10%
GVC Holdings (GVC) 740.80p 3.46%
ITV (ITV) 64.10p 3.35%
InterContinental Hotels Group (IHG) 4,124.00p 3.07%
WPP (WPP) 639.60p 3.06%
Evraz (EVR) 336.10p 3.00%
BP (BP.) 303.40p 2.71%
Prudential (PRU) 1,264.50p 2.64%
Glencore (GLEN) 176.30p 2.61%

FTSE 100 - Fallers

Polymetal International (POLY) 1,972.50p -2.01%
Fresnillo (FRES) 1,273.00p -1.55%
Rentokil Initial (RTO) 535.00p -0.82%
Severn Trent (SVT) 2,463.00p -0.69%
Pennon Group (PNN) 1,060.50p -0.61%
United Utilities Group (UU.) 899.40p -0.57%
National Grid (NG.) 896.80p -0.55%
Aveva Group (AVV) 4,539.00p -0.55%
Ocado Group (OCDO) 2,190.00p -0.50%
SEGRO (SGRO) 970.40p -0.35%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,340.00p 6.94%
Cineworld Group (CINE) 43.90p 6.94%
FDM Group (Holdings) (FDM) 1,066.00p 5.75%
Ferrexpo (FXPO) 209.00p 5.45%
Carnival (CCL) 1,013.00p 4.54%
Virgin Money UK (VMUK) 92.92p 4.50%
Aston Martin Lagonda Global Holdings (AML) 72.80p 4.00%
easyJet (EZJ) 628.40p 3.97%
TUI AG Reg Shs (DI) (TUI) 362.50p 3.90%
Capita (CPI) 38.93p 3.73%

FTSE 250 - Fallers

Centamin (DI) (CEY) 208.70p -4.88%
Domino's Pizza Group (DOM) 313.20p -3.63%
Watches of Switzerland Group (WOSG) 265.00p -3.11%
Vivo Energy (VVO) 77.20p -2.77%
Ninety One (N91) 214.80p -2.27%
Hochschild Mining (HOC) 294.60p -1.87%
Calisen (CLSN) 166.95p -1.79%
Biffa (BIFF) 200.50p -1.72%
Petropavlovsk (POG) 32.85p -1.65%
Rathbone Brothers (RAT) 1,636.00p -1.33%


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