LONDON BRIEFING: 700,000 Fewer People Employed In UK Since Lockdown

(Alliance News) - The UK unemployment rate edged up in July, official figures showed on Tuesday, ...

Alliance News 15 September, 2020 | 8:01AM
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(Alliance News) - The UK unemployment rate edged up in July, official figures showed on Tuesday, as the Covid-19 pandemic continues to dent the labour market.

The UK unemployment rate was 4.1% for the May to July period, up 0.2 of a percentage point from the three months to May. Estimates for the three-month period showed 1.4 million people out of work, up 104,000 on a year ago and 62,000 more than the prior quarter.

Early indicators for August suggest that the number of employees in the UK on payrolls was down around 695,000, or 2.4%, compared with March, the Office for National Statistics said.

The claimant count reached 2.7 million in August, more than doubled from March and up 73,000 on July.

Total annual pay - including bonuses - fell 1.0% in the May to July period, while regular pay, which strips out bonuses, edged up 0.2%. In real terms, pay is now growing at a slower rate than inflation, the ONS noted.

Darren Morgan, director of economic statistics at the ONS, commented: "Some effects of the pandemic on the labour market were beginning to unwind in July as parts of the economy reopened. Fewer workers were away on furlough and average hours rose. The number of job vacancies continued to recover into August, too."

"Nonetheless, with the number of employees on the payroll down again in August and both unemployment and redundancies sharply up in July, it is clear that coronavirus is still having a big impact on the world of work," he added.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 0.3% at 6,046.92

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Hang Seng: up 0.4% at 24,739.33

Nikkei 225: closed down 0.4% at 23,454.89

DJIA: closed up 327.69 points, or 1.2%, at 27,993.33

S&P 500: closed up 42.57 points, or 0.3%, at 3,383.54

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GBP: down at USD1.2859 (USD1.2888)

EUR: unchanged at USD1.1885 (USD1.1884)

Gold: up at USD1,962.48 per ounce (USD1,961.00)

Oil (Brent): unchanged at USD39.55 a barrel (USD39.56)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Tuesday's Key Economic Events still to come

US Federal Open Market Committee starts two-day meeting.

1100 BST Ireland goods exports and imports

1100 CEST EU labour cost index

1100 CEST Germany ZEW indicator of economic sentiment

0830 EDT US import and export price indices

1630 EDT US API weekly statistical bulletin

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UK Prime Minister Boris Johnson's controversial plan to override key elements of the Brexit deal he signed with Brussels has cleared its first Commons hurdle despite deep misgivings by some senior Tories. Members of Parliament voted to give the UK Internal Market Bill a second reading by 340 to 263 – a government majority of 77. Two Tory MPs – Roger Gale and Andrew Percy – voted against the Bill, while 30 did not cast a vote although some may have been "paired" with opposition MPs. The government tally was bolstered by the support of seven DUP MPs. Johnson said the legislation was necessary to prevent the EU taking an "extreme and unreasonable" interpretation of the provisions in the Withdrawal Agreement relating to Northern Ireland.

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The UK government has admitted it is preparing for the "reasonable worst case" scenario ahead of Brexit as a leaked report warned of queues of 7,000 lorries in Kent and significant delays to cross into the EU. A confidential document prepared by the Border & Protocol Delivery Group, and seen by The Guardian, also predicts thousands of passengers could have to wait an additional two hours for Eurostar trains. But a Cabinet Office spokeswoman said in a statement the government was using a "stretching scenario" as opposed to a prediction. "As a responsible government we continue to make extensive preparations for a wide range of scenarios, including the reasonable worst case."

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BROKER RATING CHANGES

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RBC RAISES GLENCORE TO 'OUTPERFORM' (SECTOR PERFORM) - PRICE TARGET 240 (220) PENCE

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BARCLAYS RAISES RIO TINTO TO 'EQUAL WEIGHT' (UNDERWEIGHT) - PRICE TARGET 4000 (3600) PENCE

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JPMORGAN RAISES RIO TINTO TO 'OVERWEIGHT' (NEUTRAL) - PRICE TARGET 6350 (6500) PENCE

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DEUTSCHE BANK CUTS G4S TO 'HOLD' ('BUY') - TARGET 170 PENCE

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COMPANIES - FTSE 100

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Online grocer Ocado said its switch to Marks & Spencers products from those of Waitrose is going well. Retail revenue was up 52% in its third quarter - spanning the 13 weeks to August 30 - while average orders per week rose 9.6%. Retail sales grew faster compared to the second quarter as demand remained high, Ocado noted, and comes against a "seasonally softer" quarter a year ago. Customers have "responded positively" to the switchover to Marks & Spencer products at the start of the month. Demand for the new range has driven both an increase in the number of products in customer baskets and strong forward demand, Ocadoo said, and the weighting of M&S products in the average Ocado basket is higher than Waitrose prior to the switchover. Ocado said it expects full-year earnings before interest, taxes, depreciation and amortisation of "at least" GBP40 million, as it noted Ocado Retail's strong trading performance in the first three quarters of the year.

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COMPANIES - FTSE 250

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FirstGroup ahead of its annual general meeting touted a stronger-than-expected financial performance between the start of April and end of August. Adjusted operating profit and cash from operations were ahead of expectations during the period, the bus and train operator said, driven by better revenue recovery and strong cost control. "The group is now expecting to deliver a small adjusted operating profit for the seasonally weaker first half of the financial year, ahead of our expectations earlier this summer," said FirstGroup. The company is "resolutely focused" on divesting its North American businesses and is encouraged by "significant interest" from potential buyers, it said.

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Chemring, which makes sensors and countermeasures for defence and security clients, said trading thus far has been to plan despite a challenging environment, and its expected full-year outturn - for the financial year to October 31 - is now expected towards the upper end of current analyst expectations. The current range of analyst expectations for adjusted operating profit for the current financial year is GBP47 million to GBP53 million, the firm noted. Order intake to August 31 was up 4% on the same period last year, and its order book at the same date was GBP452 million, versus GBP449 million at October 31, 2019. "We have good momentum as we near the end of FY20 and move into FY21 and, despite the near-term uncertainty that Covid-19 presents, I remain confident that our leading technologies, deep long-term customer relationships and sole-source or market leading positions mean Chemring's long-term prospects remain strong," said Chemring CEO Michael Ord.

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Domino's Pizza Group has said it is creating 5,000 jobs as it continues to benefit from the Covid-19 pandemic and households turn to its deliveries in droves. Bosses said they would also create 1,000 apprenticeship positions under the UK government's new Kickstart scheme, with "ambitious individuals" given the opportunity to apply for permanent roles following a six-month placement. The new positions will include pizza chefs, customer service workers and delivery drivers, and are on top of the 6,000 jobs Domino's said it has created since the start of the pandemic.

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COMPANIES - GLOBAL

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Citigroup will resume job cuts as the bank battles to contain costs while investing heavily in its risk and control systems, Bloomberg reported. Citigroup was one of banks that paused dismissals in March so employees would not fear for their jobs at the height of a global pandemic. Bloomberg said the cuts will affect less than 1% of the global workforce. Citi employed 204,000 people at the end of June. It expects its overall staff numbers to remain stable, once the lay-offs are offset against new hires, which have totalled 26,000 this year. The reductions will come as Citigroup is facing a likely revenue drop and another increase to loan-loss reserves this quarter as the Covid-19 pandemic drags on.

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UBS Group brought in external management consultants to examine a potential merger with Credit Suisse Group to create a Swiss wealth management and investment banking behemoth, the Financial Times reported, citing people briefed on the matter. Both banks declined to provide a comment on the discussions to the FT. A top-10 shareholder at one of the Swiss banks told the newspaper that he had not been consulted about a potential deal and would not be supportive.

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Tuesday's Shareholder Meetings

Wynnstay Properties

Cohort

SME Credit Realisation Fund

FirstGroup

Halfords Group

Henderson Diversified Income Trust

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
G4S PLC 193.60 GBX 1.41
Glencore PLC 180.60 GBX -2.38
Rio Tinto PLC 5,007.00 GBX 0.34

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