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The UK unemployment rate was steady in June, figures on Tuesday showed, but while wages grew faster than expected, real pay has dropped at the steepest pace on record.
The UK unemployment rate was 3.8% in the three months to June, unchanged from the three months to May, according to the Office for National Statistics. A year earlier, the unemployment rate had sat at 4.7%.
The latest figure was in line with FXStreet-cited consensus.
Wage growth figures, meanwhile, came in above expectations. Regular pay, so excluding bonuses, was 4.7% higher annually in the three months to June, accelerating from 4.4% in the three months to May. The figure topped FXStreet cited consensus of 4.5% growth.
Including bonuses, wage growth was 5.1% year-on-year, beating a forecast of 4.5% growth. However, this marked a slowdown from May's growth of 6.4%.
That means UK earnings by both measures continue to lag consumer price inflation, which ran at an annual rate of 9.4% in June.
In real terms - meaning adjusted for inflation - total pay fell 2.5% and regular pay fell 3.0%.
Darren Morgan, ONS director of economic statistics, said: ‘The real value of pay continues to fall. Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001.’
Paul Craig, portfolio manager at Quilter Investors, said June's wage growth will be ‘little comfort’ for workers given the real terms pay cut.
‘While Andrew Bailey won't want to see pay rising too quickly, we are headed for a difficult winter where some parts of the population will be struggling with energy bills and the cost of food. If inflation continues on its trajectory to the forecasted 13% this is only going to exacerbate the situation further. The pay demands we have seen in the public sector of late are only going to get louder,’ said Craig.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 7,541.25
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Hang Seng: down 1.4% at 19,767.21
Nikkei 225: closed flat at 28,868.91
S&P/ASX 200: closed up 0.6% at 7,105.40
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DJIA: closed up 151.39 points, or 0.5%, at 33,912.44
S&P 500: closed up 16.99 points, or 0.4%, at 4,297.14
Nasdaq Composite: closed up 80.87 points, or 0.6%, at 13,128.05
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EUR: down at $1.0142 ($1.0184)
GBP: down at $1.2022 ($1.2075)
USD: up at JP¥133.68 (JP¥133.07)
Gold: firm at $1,778.82 per ounce ($1,778.71)
Oil (Brent): down at $93.94 a barrel ($94.22)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's key economic events still to come
1100 CEST EU foreign trade
1100 CEST Germany ZEW indicator of economic sentiment
0830 EDT US new residential construction
0855 EDT US Redbook index
0915 EDT US industrial production
1630 EDT US API weekly statistical bulletin
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A new post-Brexit trading scheme cutting tariffs to hundreds of products from developing countries is among the most generous in the world, the UK government has said. UK Secretary of State for International Trade Anne-Marie Trevelyan described the scheme, which will see everything from certain clothes to olive oil and tomatoes benefitting from lower or zero tariffs, as ‘taking back control’ of UK trade policy. Tariffs, which are taxes charged on imported goods from foreign countries, will be cut on a range of products as part of the new Developing Countries Trading Scheme. According to the Department for International Trade, the tariff cut is more generous that the equivalent EU scheme and will mean 99% of goods imported from Africa will enter the UK duty free. The new scheme, which will come into force early next year, replaces the old UK Generalised Scheme of Preferences that had rolled over from EU membership.
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Chinese lithium hub Sichuan province will ration electricity supply to factories until Saturday, state media reported, as a heatwave sends power demands soaring and dries up reservoirs. Temperatures in the province home to nearly 84 million people have hovered above 40-42 degrees Celsius since last week, according to data from China's Meteorological Administration, increasing the demand for air conditioning. The region relies on dams to generate 80% of its electricity, but rivers in the area have dried up this summer, Beijing's Water Resources Ministry said. The province in China's southwest produces half the nation's lithium, used in batteries for electric vehicles, and its hydropower projects provide electricity to industrial hubs along the country's east coast.
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BROKER RATING CHANGES
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RBC starts Haleon with 'sector perform' - price target 300 pence
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COMPANIES - FTSE 100
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abrdn said it has sold 12.8 million shares in HDFC Asset Management, receiving £225 million. The sales were made on the National Stock Exchange of India and Bombay Stock Exchange. The sold shares amounted to a 6.0% stake. abrdn's remaining holding is just over 10%.
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Sage said it has acquired Lockstep, which provides cloud native technology for accounting workflows between companies. ‘The acquisition of Lockstep accelerates Sage's strategy for growth by broadening its value proposition for SMBs and by expanding Sage's digital network,’ the FTSE 100 constituent said. It did not reveal a consideration for the deal.
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COMPANIES - FTSE 250
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Rolex watch seller Watches of Switzerland said revenue in the first quarter ended July 31 climbed 31% year-on-year to £391 million from £297 million. The FTSE 250 constituent noted a ‘strong performance against a particularly strong comparative in the UK with Q1 FY21 benefitting from de-stocking and pent-up demand as showrooms re-opened following the Covid-19 lockdown’. US quarterly revenue doubled year-on-year, while in the UK, it rose 8%. ‘While we continue to monitor the wider macro-economic environment, we believe that the strength of the luxury watch category, with its unique supply/demand dynamics, together with the success and agility of our model will continue to support long-term sustainable strong sales growth,’ it said. Watches of Switzerland affirmed guidance. It expects annual revenue between £1.45 billion and £1.50 billion, up from £1.24 billion in financial 2024. Guidance assumes a ‘potentially more challenging trading environment in the second half’.
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Genuit said interim revenue increased, though profit inched lower as costs rose. Revenue in the half-year to June 30 increased 7.6% to £318.0 million from £295.6 million a year prior. Pretax profit slipped 2.7% year-on-year, however, to £32.9 million from £33.8 million. Selling and distribution costs were 6.8% higher at £42.7 million, while administration expenses rose 0.8% to £37.7 million. Genuit lifted its payout by 2.5% to 4.1 pence per share from 4.0p. ‘Genuit has performed well in the first half. Agile pricing leadership offset inflationary pressures, and the effect of selective business decisions helped to increase our margins. These, with more focus on operational efficiency, overcame some limited headwinds while delivering revenue growth over the prior year and improving profitability throughout the second quarter,’ Chief Executive Officer Joe Vorih said. ‘While mindful of the macroeconomic pressures, we have good momentum as we enter the second half, and the group anticipates meeting full year expectations.’
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Darktrace on Monday confirmed that it is in early stages of discussions with Thoma Bravo on a possible cash offer for the Cambridge-based cybersecurity company. Under the City Code on Takeovers & Mergers, Chicago, Illinois-based private equity firm Thoma Bravo has until September 12 to make a firm offer for Darktrace, or state that it will not be making an offer. Darktrace stressed that there was no guarantee that any offer will be made.
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COMPANIES - SMALL CAP
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Ted Baker has agreed to £211 million takeover from Reebok owner Authentic Brands Group, ending a several months long formal sales process. Ted Baker currently has a market capitalisation of £167.4 million. ABG will fork out 110p per Ted Baker share, an 18% premium to the retailer's 93.1p closing price on Monday. ‘Today, we are announcing an all-cash offer from ABG. The Ted Baker board believes the offer, which is supported by Ted Baker shareholders with a majority of shares, represents a fair value for shareholders and balances the company's growth prospects with the risks of the uncertain economic environment in which the business is operating,’ Ted Baker Interim Chair Helena Feltham said. Ted Baker has been in a formal sales process since April, and initially had said that Sycamore Partners Management, a New York-based private equity firm whose approaches had triggered the move, was participating. However, Ted Baker later confirmed that Sycamore was no longer participating in the sales process. In May, Ted Baker said it had progressed talks with a ‘preferred counterparty’ into the due diligence phase, however the unnamed party had bowed out of a potential deal in June. ABG in March completed the buy of Reebok from Adidas in a deal worth up to €2.1 billion.
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COMPANIES - GLOBAL
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Activist investor Third Point Management acquired a stake in Walt Disney Co and called for sweeping changes at the entertainment company, according to Bloomberg on Monday. Bloomberg reported that these changes included a spinoff of the ESPN sports network and new board members. The suggestions were made in a letter Monday to Disney Chief Executive Officer Bob Chapek. The report added that Dan Loeb said his Third Point investment firm had taken a ‘significant stake’ in the company in recent weeks. The investor owned Disney shares previously but sold earlier this year, according to Bloomberg data. ‘ESPN is a great business that currently generates significant free cash flow,’ Loeb said in the letter. ‘Despite these advantages, we believe that a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load that will alleviate leverage at the parent company.’
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Tuesday's shareholder meetings
Go-Ahead Group PLC - GM re takeover by Kinetic and Globalvia consortium
NatWest Group PLC - GM proposed special dividends
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