Our head of investment rounds up the morning's big news.
The FTSE 100 has opened higher for the eighth consecutive session, trading above 7,900 with miners like Fresnillo (LSE:FRES), Antofagasta (LSE:ANTO), Anglo American (LSE:AAL) and Glencore (LSE:GLEN) outperforming.
Basic resources are enjoying a tailwind from China’s strong first quarter GDP figure which hit 4.5%, beating expectations for 4%, thanks to the release of pent-up demand after Beijing unwound its strict Covid lockdown measures late last year.
US futures are pointing higher after Wall Street closed Monday in the green, with the Russell 2000 outperforming to close higher by over 1%.
The UK jobless rate rose to +3.8% in the three months to February, above expectations for 3.7% and the highest since the second quarter of last year. 348,000 working days were lost because of labour disputes in February, up from 210,000 in January.
Average weekly earnings grew by 5.9% year-on-year in the three months to February, ahead of expectations for 5.1%. Excluding bonuses this figure was up 6.6%, also topping forecasts for 6.2%. After taking inflation into account, average pay including bonuses fell by 3%, or 2.3% excluding bonuses. However, the gap between public and private sector earnings growth is narrowing.
Job vacancies between January and March hit 1.105 million, down 47,000 on the previous quarter. The number of employees on the payroll, however, rose by 31,000 in March and is now 986,000 above pre-pandemic levels.
The latest data from the Office for National Statistics saw the unemployment rate unexpectedly pick up as the labour market starts to show incipient signs of weakness amid the softening economic backdrop. There was an increase in the number of those either in work or actively job seeking, as pressures on the cost-of-living prompt individuals to return to the labour market. However, job vacancies have been on the decline albeit from elevated levels as businesses become increasingly cautious about the hiring plans amid the sluggish economy, opting for temporary workers where they can over full-time payroll staff.
Strikes are still major headwind for the labour market, with the education sector most affected accounting for over 60% of the total. While earnings grew faster than expected, inflation continues to erode real-terms wage growth which is stuck in negative territory.
For the Bank of England, while the pick-up in the headline unemployment rate and a softening in the labour market could encourage it to take a dovish stance at its next decision meeting in May, the central bank must balance this against the ongoing pressures from inflation on wage growth which is declining in real terms. All eyes are on Wednesday’s inflation data amid hopes that the headline rate will finally drop back into single digits below 10%.
Entain (LSE:ENT) reported online first quarter net gaming revenue (NGR) up 16%, meeting analysts’ expectations. The betting group enjoyed a strong performance in retail, with first quarter NGR up 14%. It achieved record levels of active customers in the first quarter, up 19% year-on-year. Sports betting platform BetMGM had a successful quarter partly thanks to the Super Bowl. Entain said earlier in the year it plans to end financial support for BetMGM, its joint venture with MGM Resorts.
The parent company of Ladbrokes and Coral is trading higher today but remains modestly lower year-to-date. Today’s upbeat financial update with an improvement in online net gaming revenue has helped to extend optimism after Entain raised its profit outlook in February.
However, the regulatory landscape remains an overhang for the sector, and the abandonment of MGM’s potential takeover of the group has also put pressure on the stock this year as the supportive M&A share price premium fades.
In an extremely volatile week, THG Ordinary Share (LSE:THG) shares surged more than 40% on Monday following a buyout approach from private equity giant Apollo, yet the stock has slumped as much as 16% at the start of the session and is currently down 5% at the time of writing.
The London-listed e-commerce group reported adjusted core earnings of £64.1 million in 2022, falling short of its guidance for £70-80 million. Gross profit margin fell to 41.3% versus 44.7% year-on-year. CEO Matthew Moulding said earnings were ‘not where we planned at the start of the year’.
THG shareholders have had an extremely tough time, with this stock which is down around 90% since floating on the London Stock Exchange in September 2020. Investors are hoping that a private equity buyout could put an end to this bad chapter. The company behind numerous brands including LookFantastic and MyProtein has struggled recently with high raw material costs, particularly for whey protein which have squeezed its margins.
THG was also caught up in the broader sell-off across technology last year, as the e-commerce boom faded post pandemic and the punchbowl of cheap money was removed as central banks rushed to extinguish spiralling inflation. There are also the macro pressures from a softening consumer and a weak economic backdrop creating significant uncertainty this year.
Moulding said we are in a ‘challenging macro and inflationary environment’ but said ‘a much-improved outlook on many key cost inputs gives us confidence’.
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