Our head of investment rounds up the morning's big news.
European markets are trading higher, taking their cues from the rally on Wall Street, with the FTSE 100 inching closer to 7,600 as investors get set for a mega week for central banks.
China’s stimulus overnight has lifted miners like Glencore (LSE:GLEN), Rio Tinto Registered Shares (LSE:RIO), and Anglo American (LSE:AAL) to the top of the UK blue-chip index. Meanwhile Admiral Group (LSE:ADM) is languishing at the bottom of the FTSE 100 after Citi reportedly downgraded the stock to a sell. Focus is on the latest US inflation figures today ahead of the Fed’s rate decision on Wednesday.
The People’s Bank of China lowered its seven-day reverse repo rate by 10 basis points to 1.9%, carrying out the first cut in ten months. This is in a bid to stimulate the Chinese economy which has struggled with a bumpy recovery since unwinding its anti-Covid lockdown measures late last year.
The UK unemployment rate between February and April rose by 0.1 percentage points to 3.8%. However, employment rose, with the number of people in work breaking back above its pre-pandemic level for the first time to hit a new record high, driven by health and social care as well as hospitality. UK payrolls rose by 23,000 in May to 30 million, over a million more than before Covid.
Job vacancies between March and May fell by 79,000, marking the eleventh consecutive period of falling job openings. This suggests that businesses continue to be cautious about their hiring plans amid nervousness towards the uncertain economic backdrop.
Excluding the pandemic period, basic pay is growing at the fastest pace since records began. However, real pay remains in negative territory, eroded away by inflation. Once price increases are accounted for, total pay fell by 2% in the year to February to April or 1.3% excluding bonuses.
The pound is trading higher following the rise in employment and pay growth which both point to ongoing tightness in the labour market despite the UK’s economic headwinds. The labour market dynamics could inhibit the decline of inflation, prompting the Bank of England to carry out further interest rate increases to cool price pressures.
HSBC Holdings (LSE:HSBA) has decided to wind down its wealth and personal banking business in New Zealand. In November, the lender said it was reviewing its NZ retail banking business to optimize its network operations.
Last year it also sold its business in Canada and reduced the size of its US and French retail banks. HSBC has been under pressure from its largest shareholder, Ping An Insurance Group in China which has been trying to convince the lender to spin off its Asia business into a separate Hong Kong listed entity. However, HSBC thinks these proposals would be detrimental to its global presence.
HSBC is streamlining its business by winding down its smaller, less profitable components in order to appease Ping An and focus on its core businesses without sacrificing its global footprint.
Shares in HSBC have staged an impressive recovery following the collapse of SVB and banking sector turmoil. The stock is up almost 15% so far this year, outperforming the FTSE 100 and has been on a steady climb since the trough in March.
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