London close: Stocks maintain gains after latest jobs data

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Associated British Foods

2,355.00p

09:15 05/11/24

2.88%

66.00p

London’s top-flight index ended Tuesday on a positive note, with AB Foods in focus on the back of an optimistic trading statement, as investors pored over the latest UK jobs data.

Smurfit Westrock (DI)

3,985.00p

09:04 05/11/24

0.15%

6.00p

The FTSE 100 closed up 0.41% at 7,527.53, while the FTSE 250 finished 0.11% firmer at 18,542.30.

In currency markets, sterling was last down 0.33% on the dollar, trading at $1.2468, while it remained stable against the euro to change hands at €1.1636.

“Stock indices, except the energy laden FTSE 100, gave back some of Monday's gains as the tech sector slid,” said IG senior market analyst Axel Rudolph.

“WestRock added about 6% after agreeing to merge with Smurfit Kappa to create the world's largest listed paper and packaging company.

“In the UK higher-than-expected wage inflation while unemployment edged higher is giving the Bank of England something to think about ahead of its rate decision next week.”

Unemployment rate rises amid strong wage growth; grocery prices stabilise

In economic news, the Office for National Statistics (ONS) reported that UK wage growth sustained its 22-year peak in July.

While average regular earnings saw no change, remaining at an impressive 7.8% over the three months to July, it surpassed the consumer price inflation rate, which was recorded at 6.8%.

However, there was a slight uptick in the unemployment rate, which rose to 4.3% from 4.2% in the prior month.

Moreover, July saw a change in average total pay changes, which rose to 8.5%, a 0.3% increase from June.

The ONS attributed the increment to one-off payments made to NHS employees and civil servants, following settlements that successfully ended strike action.

On a slightly sombre note, however, the number of job openings in the country saw a decrease, falling by 64,000 to 989,000 in the three months leading to August.

Darren Morgan, director of economic statistics at the ONS, said earnings in cash terms were continuing to increase at a record rate outside the pandemic-affected period.

“Coupled with lower inflation, this means people’s real pay is no longer falling,” he said.

“Unemployment continues to increase in the latest three months. Correspondingly, employment is down, driven by falls among men and the self-employed.

“The proportion of people neither working or looking for a job is slightly up, with more students, as well as the long-term sick reaching yet another record.”

In the realm of consumer goods, there was a sliver of relief for Britons as data from Kantar showed that the annual inflation rate for groceries receded for the sixth successive month.

Clocking in at 12.2% during the month leading to 3 September, it was still a dip from 12.7% in the prior month and marked the most moderate pace of growth in a year.

Despite that, concerns over shopping expenses continued to be a dominant sentiment among the majority of consumers.

“12.2% won’t be a number to celebrate for many households,” said Kantar's head of retail and consumer insight Fraser McKevitt.

“Our data shows that 95% of consumers are still worried about the impact of rising grocery prices, matched only by their concern about energy bills.

“After a full year of double digit grocery inflation, it’s no surprise that just under a quarter of the population consider themselves to be struggling financially - although this is a very slight drop compared to May.”

Meanwhile, on the continent, Germany saw an unexpected rise in investor sentiment for September.

The ZEW investor expectations index reached -11.4 from August's -12.3, surpassing the forecasted -15.0.

Still, the present conditions index declined, plummeting to a three-year low of -79.4 from -71.3 in the prior month - a figure that was notably lower than the anticipated -75.0.

AB Foods and JTC shine; Smurfit Kappa merges with US rival

On London’s equity markets, Associated British Foods jumped 5.55% after it raised its annual guidance again, driven by a revival at its Primark retail chain and commendable food operation results.

AB Foods said it anticipated its full-year adjusted operating profit to surpass previous expectations.

The firm previously indicated that earnings would be “moderately ahead” of the £1.43bn reported for the 2022 financial year.

It now projected a like-for-like sales growth of about 9% for Primark for the year, while the second half was set to see a growth of about 7%.

The year's total sales were likely to be approximately 15% higher than the previous year.

Elsewhere, JTC was boosted 8.45% after the firm expressed confidence in delivering full-year results ahead of current market projections.

On the downside, Smurfit Kappa Group dropped 9.78% after it announced a merger with its US-based competitor WestRock.

The union was expected to form a mammoth $20bn packaging entity.

WestRock shareholders would be entitled to one new Smurfit WestRock share and an additional $5 in cash.

The total value of this deal would be around $43.51 per share, based on Smurfit's closing price on Monday.

Sector peers DS Smith and Mondi were also affected, recording losses of 2% and 1.26%, respectively.

Finally, Chemring Group was down 6.08% after the aerospace, defence, and security tech conglomerate said it would meet this year's projections, contingent on the US Department of Defense endorsing a £25m order.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,527.53 0.41%
FTSE 250 (MCX) 18,542.30 0.11%
techMARK (TASX) 4,339.38 0.29%

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