Must read: FTSE 100, UK jobs, Vodafone, BAE Systems, Land Securities

There's some interesting economic data for investors to get their teeth into today as well as a slew of company results. Our head of investment rounds up the action.

GLOBAL MARKETS 

European markets have opened mostly higher with the DAX in positive territory, while the FTSE 100 recovered from an initial dip to trade marginally in positive territory.

Centrica (LSE:CNA) is trading at the top of the FTSE 100 after it started its share buyback programme and BAE Systems (LSE:BA.) is in second place thanks to a bullish update from the defence company. 

Overnight in Asia, the Hang Seng closed sharply higher with tech stocks leading the charge, despite disappointing economic data in China. Stocks in the Asia-Pacific traded higher amid optimism towards US-Sino relations after the meeting between President Xi Jinping and President Biden in Bali appeared to go well ahead of the G20 Summit. 

• Find out about: US Earnings Season | Top US Stocks | Interactive investor Offers

US futures are trading higher after a disappointing session to kick off the week stateside, with markets giving back some of last week’s impressive gains. Focus is on the retail sector later today, with quarterly results from The Home Depot Inc (NYSE:HD) and Walmart Inc (NYSE:WMT), a key US economic bellwether for the strength of the consumer.

UK UNEMPLOYMENT 

The UK unemployment rate for July to September hit 3.6%, slightly above analysts’ estimates for 3.5%, but 0.2 percentage points lower than the previous quarter and 0.4 percentage points below pre-pandemic levels. However, the economic inactivity rate increased to 21.6%, rising 0.2 percentage points quarter-on-quarter and is still 1.4 percentage points higher than before Covid-19.

In August to October, the number of job vacancies fell by 46,000 to 1.225 million, in the fourth consecutive quarterly drop, but remain at historically high levels. Average weekly earnings grew by 6% year-on-year in July to September, higher than analysts’ estimates for 5.9% and the strongest growth in regular pay seen outside of the coronavirus pandemic period. Average regular pay grew by 6.6% in the private sector, but just 2.2% in the public sector. Meanwhile the claimant count change for October came in strong, with fewer than expected people claiming unemployment benefits. 

Both the decrease in the unemployment rate and the increase in the economic inactivity rate were driven largely by men. The overall employment rate remained roughly the same, but for women it fell slightly. The number of full-time employees decreased over the last three months and, while part-time workers have been rising since the start of 2021, they also fell during the third quarter. Self-employed workers fell during Covid and remained low afterwards but picked up during the latest three-month period, and the number of people with second jobs increased slightly by 29,000 to 1.252 million. Plus, the number off work due to long-term illness hit a record high. 

Despite fears of a looming recession, the labour market has remained very tight post pandemic, driven by the Great Resignation after Covid as well as Brexit and long-term sickness which have reduced the available pool of potential employees in the UK. That's created a worker shortage, pushing up job vacancies and flattening the unemployment rate. This has also given workers much more bargaining power when it comes to wage negotiations, allowing employees to demand higher wages to cover at least some of the increased cost of living, especially in the private sector.

However, we are beginning to see tentative signs of an economic slowdown come through in the labour market figures now, with job vacancies retreating from the highs as businesses make cutbacks and reduce hiring and with the unemployment rate surpassing analysts’ expectations. And, although wages are rising sharply, they are still falling short of inflation, representing a real pay cut both in the private and public sector. 

No doubt Jeremy Hunt will claim both the low unemployment rate and high wage growth as victories for the government when he delivers his Autumn Statement on Thursday. But underneath the surface, the picture is less rosy, with inflation still eroding real pay and with a major worker shortage that is adding to the inflationary backdrop and making the labour market appear stronger than it really is. 

• Watch out for pension and inheritance tax raid in Autumn Statement
• Bank issues recession warning after biggest interest rate rise since 1989

Cable (GBPUSD) is trading higher this morning above $1.18, while the pound is trading flat against the euro. The pound’s appreciation against the US dollar is mostly a dollar move with the greenback weakening against a number of major currencies, extending losses after its biggest weekly drop in 14 years last week amid the prospect of a slowing pace of Fed tightening ahead.

VODAFONE

Vodafone Group (LSE:VOD) downgraded its full-year free cash flow forecast from 5.3 billion euros to 5.1 billion euros, sending shares sharply lower. It also warned that adjusted core earnings would reach between 15–15.2 billion euros, falling from its previous forecast of 15–15.5 billion euros. The telecoms giant reported a 2.6% drop in six-month adjusted earnings, while revenue grew by 2% to 22.9 billion euros. 

Although Vodafone managed to grow its sales thanks to higher services revenue growth and equipment sales, its earnings suffered in the first half, and it offered a gloomy full-year outlook. Vodafone has been struggling in Germany on the back of broadband and TV losses following regulatory changes in its biggest market. Although Vodafone said in July it was on track to reach its full-year targets, today the telecoms player said it expected earnings to come in at the bottom end of its expected range, reflecting the macroeconomic headwinds from inflation and the growing threat of recession.

Vodafone has been struggling with increasing costs from energy and labour as inflation takes its toll. It has been offsetting this to some extent by increasing prices, but whether consumers will be able willing and able to pay these extra charges in this cost-of-living, price sensitive environment is yet to see be seen. 

Vodafone is down around 14% year-to-date, underperforming the FTSE 100, with shares giving back some of its recent gains today.

BAE SYSTEMS 

BAE Systems says it is on track to reach its full-year underlying earnings per share guidance of between 4% and 6% on a constant currency basis. The defence company expects growth to continue next year and says it is tracking towards a ‘very strong year of order intake.’ It has secured a further £10 billion in orders for the second half to date. 

BAE Systems is one of the best performing stocks on the FTSE 100 this year, rallying by more than 33%. The war in Ukraine has sharply boosted demand for its products, allowing Britain’s biggest defence business to fulfil large orders of jets, submarines and other military and security solutions. On top of that, BAE has enjoyed a tailwind from this year’s more than 12% depreciation for the pound against the US dollar, which has improved the look of its figures when international US dollar sales are translated back into pounds.

BAE Systems has helped the FTSE 100 to remain relatively resilient this year amid the market volatility on the back of rising inflation and interest rates.

LAND SECURITIES 

Land Securities Group (LSE:LAND) reported a first half loss before tax of £192 million, swinging from a profit of £275 million in the same period last year. The commercial property giant said transaction volumes across global and UK property markets ‘slowed considerably during the half-year’. 

Commercial property has had a tough time since the pandemic, with a decline in demand for office space amid the shift towards hybrid working arrangements and increased working from home. Retail has also been facing an uphill battle against the shift towards online shopping, a change which was also expedited by the pandemic and is sharply weighing on high streets across Britain.

Recent indicators suggest residential property is now starting to slow as rising interest rates from the Bank of England coupled with the fiscal fiasco of the mini-budget sent mortgage rates through the roof. Plus, the threat of recession and the expectation that house prices look set to ease into 2023 are sharply dampening real estate demand and prices. Landsec is grappling with a perfect storm of rising interest rates, a looming recession and competition from rising bond yields which are making property yields look comparatively less attractive. 

Shares in Landsec have struggled this year, down by 20% year-to-date. However, the trajectory has started to look more positive since the October low, with shares rebounding more than 16% over the past month, despite today’s modest decline.