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LONDON MARKET MIDDAY: UK jobs figures lift pound and stocks

UK employment and earnings figures on Tuesday highlighted the need for the Bank of England to tighten monetary policy to get inflation under control, allowing sterling to recover some of its recent losses against the dollar.

The pound was quoted at $1.2467 midday Tuesday, sharply up from $1.2250 at the London equities close on Monday.

London equities also were reacting positively to the strong UK jobs figures, as well as some positive company trading updates and merger and acquisition activity. Suggestions that the tight Covid-19 lockdowns in China may start to be eased were further lifting investor sentiment.

The FTSE 100 index was up 71.43 points, or 1.0%, at 7,536.23 midday Tuesday. The mid-cap FTSE 250 index was up 210.23 points, or 1.1%, at 20,134.34. The AIM All-Share index was up 6.25 points, or 0.7%, at 961.83.

The Cboe UK 100 index was up 1.1% at 751.24. The Cboe 250 was up 1.1% at 17,803.26, and the Cboe Small Companies up 0.5% at 14,732.69.

In Paris, the CAC 40 stock index was up 1.3% and the DAX 40 in Frankfurt was 1.5% higher.

The UK labour market is in a better state that expected, but conditions still remain tight, official data showed on Tuesday. Joblessness was reduced and wages increased, though not by enough to keep pace with inflation.

The Office for National Statistics noted the UK unemployment rate had generally been falling since late 2013 up until the start of the Covid-19 pandemic in December 2019 to February 2020. Jobless increased then but has now returned to its pre-virus level.

The UK unemployment rate was estimated at 3.7% in the three months to May, 0.3 percentage point lower than the previous three-month period, and 0.2 percentage point below the pre-coronavirus pandemic level - which covers the period from December 2019 to February 2020.

The figure also beat the market consensus forecast, according to FXStreet, of 3.8%.

The ONS also released figures showing regular pay, which excludes bonuses, in the UK was up 4.2% year on year in January to March - in line with expectations.

However, in real terms - adjusted for inflation - in January to March 2022, growth in total pay, which includes bonuses, was 1.4%, but regular pay fell by 1.2% on the same period a year prior.

Imperial Brands was the best performer in the FTSE 100, up 7.7%, after it backed its prior guidance and reported that its core Combustible business is stabilising.

In the six months that ended March 31, the Bristol-based tobacco firm reported a 27% fall in operating profit to £1.20 billion from £1.64 billion a year before.

Imperial explained that operating profit in the recent year suffered from £201 million in charges for its exit from Russia, while the year before benefited from a £281 million gain from the sale of its cigar business.

Pretax profit sunk 39% to £1.26 billion from £2.06 billion, while net revenue fell by 1.3% to £15.36 billion from £15.57 billion, which was blamed on lower excise duty in Europe.

Imperial Brands approved an interim dividend of 42.54 pence per share, reflecting a 1.0% increase from 42.12p a year ago.

Peer British American Tobacco gained 1.5%.

Uniliever was stuck to the bottom of the blue-chip index, down 1.5%, after Societe Generale cut the consumer goods firm to 'sell' from 'buy'.

In the FTSE 250, ContourGlobal surged 33% after it agreed to a takeover by US private equity giant Kohlberg Kravis Roberts & Co.

New York-based KKR has offered 263.6p per share for ContourGlobal, valuing the London-based power generation firm at about £1.75 billion. It closed trading in London on Monday at 193.40p, giving it a market cap of about £1.25 billion.

ContourGlobal's board have unanimously recommended the deal. Chair Craig Huff said the offer will ‘provide an opportunity for all shareholders to crystallise their investment in ContourGlobal at an attractive price.’ ContourGlobal's largest shareholder, Reservoir Capital, also has accepted the offer for its 71.4% stake.

In total, KKR said it already has acceptances for the offer representing 72.8% of ContourGlobal shares.

‘The board of ContourGlobal welcomes KKR's intention to provide capital and operational expertise to support ContourGlobal's strategy, including accelerating investments in the energy transition,’ he added.

C&C Group advanced 6.3% as the beer and cider maker swung to an annual profit as trading restrictions eased and demand for its drinks rose.

For the financial year that ended February 28, pretax profit was £45.7 million, swinging from a loss of £121.3 million the year before. Revenue rose 75% to £1.79 billion from £1.02 billion.

C&C did not propose a dividend, but said the board is targeting a return to dividend payments ‘in due course’.

Trading in its financial year 2023 has started strongly, C&C added. The firm aims to increase investment in its brands and ‘continue to execute efficiency improvement plans, primarily in our GB business unit,’ it said.

TI Fluid was anchored to the bottom of the list of London mid-caps, dropping 12%. Revenue fell in the first quarter of 2022, reflecting the continued disruptions to its supply chain, the conflict in Ukraine, and Covid-19 lockdowns in China.

TI Fluid, which makes products including brake fluids and fuel tanks for cars and trucks, said revenue in the three months that ended March 31 fell 4.1% to €755.0 million from €787.0 million.

The company saw its steepest revenue decline in Latin America, where it dropped 19% against the previous year. The only revenue growth was in North America, where it grew 3.5% in the quarter against the prior year.

Looking forward, TI Fluid expects margins in the first half of 2022 to be ‘modestly’ lower than in the second half of 2021 due to disruptions in production, ongoing inflation and a time lag on recovered. Nonetheless, TI Fluid expects in 2022 to outperform 2021's revenue figure, though it didn't specify to what extent.

The euro was priced at $1.0518, up against $1.0402. Against the yen, the dollar was trading at JP¥129.28, firm from JP¥129.10.

Brent oil was quoted at $115.07 a barrel midday Tuesday, significantly higher from $112.19 late Monday. Gold stood at $1,828.60 an ounce, up against $1,812.63.

Shanghai declared it has achieved ‘zero-Covid’ across all its districts, sparking derision on social media as millions in China's biggest city remained under lockdown. ‘All 16 districts of Shanghai have already achieved zero-Covid at the community level,’ Shanghai health commission official Zhao Dandan told reporters on Tuesday. That means none of the over 1,000 new infections recorded on Tuesday was detected outside of quarantined areas, city authorities said.

Looking ahead to the open in New York, Wall Street is painted green. The Dow Jones Industrial Average was called up 1.5%, the S&P 500 up 1.7%, and the Nasdaq Composite up 2.1%.

Still in the economic calendar for Tuesday, there are US retail sales at 1330 BST.

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