Unbelievable! FTSE 100 Experiences Record-Breaking Surge in Pay – You Won’t Believe How Fast It’s Growing!

FTSE opens lower on rate expectations

The FTSE 100 has opened lower as unexpectedly high wage growth raised expectations of more interest rate rises.

Here’s a look at your key market data.

‘Labour market shifting to new ground’

Kate Shoesmith, Recrutment and Employment Confederation deputy chief executive, said: “This is a labour market shifting to new ground and will be one the Bank of England and government will closely monitor because of the direct impact it is having on the economy. The unemployment rate is marginally above most predictions and we’re getting a sense of a loosening jobs market – where the demand for talent in certain sectors remains high, while there is a fall back in demand in other key sectors.

“These issues are deeply intertwined. For example, it’s particularly concerning to see the record high of economically inactive people because of long-term sickness, meanwhile, we continue to see significant problems recruiting and retaining staff in the health and care sectors. We need a fundamental rethink of the models of work in the NHS and beyond.

“The labour market remains tight enough to continue to put pressure on employers by pushing up pay, with the highest regular annual growth rate we have seen since comparable records began in 2001 – but much of this will be down to recent pay deals negotiated and is one to watch closely. Pay is important, but it is not the only thing employers should consider. Today’s workers weigh pay against the whole package, such as flexible working, training, annual leave – and even whether the corporate culture aligns to their personal values. This is why our Overcoming Shortages report last year stressed to employers the importance of working conditions and getting the offer right.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the latest jobs figures suggest the economy could be stuck in a world of stagflation, with fast price rises but little to no growth.

She said: ‘’The blast of cold air from higher interest rates is being felt in the labour market, with unemployment ticking up but the risk is that the growth in wages will continue to fan the fires of inflation.

“With the highest annual wage growth recorded in June since records began in 2001, another rate hike from the Bank of England looks bolted on in September. The pound has crept upwards on expectation that rates will rise again but significant gains are set to be limited given the challenges ahead of the UK economy. Sterling rose by 0.28% immediately after the jobs data was released, rising to $1.272 and also strengthening against the euro, before losing some ground.

“The picture painted by these jobs numbers is adding up to be a stagflation scenario, with prospects of growth slim while inflation risks staying stubborn. Industrial disputes between NHS workers and the government are not helping the inflation battle. The number of people inactive because of long-term sickness has increased to a record high, and with painful waits for treatment not set to be cured any time soon, the fight for labour is set to continue.

“With real wages moving back into positive territory for the first time and surpassing the headline inflation rate, consumer spending is expected to stay more upbeat, which bodes better for companies selling discretionary goods – items we might want but we don’t necessarily need.”

L&G profit beats forecasts, shares lower

Legal & General today reported a 2% fall in half-year operating profits to £941 million, a performance well ahead of City expectations of around £834 million.

The result was bolstered by new business in the transfer of corporate pension risk, with the institutional retirement division lifting profits by 19% to £471 million amid strong demand in the UK and United States.

L&G’s retail’s arm, which includes workplace savings, annuities, income drawdown and lifetime mortgages, saw a 22% fall in profits to £230 million as a lower contribution from fintech investments offset core insurance operating profit growth of 4%.

Today’s figures are the first under new accounting rules that smooth out the timing of profit recognition but have no bearing on cash flow metrics.

Shares opened 4.1p lower at 229p despite the company remaining on track to deliver its five-year ambitions for the 2020-2024 period. L&G disclosed a 5% increase in dividend to 5.71p a share.

Is the triple lock at risk?

The latest rise in wage growth will raise questions about the pension ‘triple lock’, which mandates that pensions will always rise at the pace of the fastest of three measures: earnings growth, inflation and a flat 2.5% rise.

Adrian Lowery, financial analyst at wealth manager Evelyn Partners, said: “Average earnings growth excluding bonuses, which had been expected to tick up to 7.4% in the quarter through June from 7.3% in the previous three-month period, is now the highest on records going back to 2001.

“This above-expectations wage growth will be watched nervously at the Treasury as it threatens to add fuel to the triple lock fire. The wages element of the triple lock – annual earnings growth for May to July – won’t be available until next month but this outcome suggests it could be significant. Moreover, strong wage growth is likely to impair the retreat of inflation in the coming months, and the Bank of England recently warned that the pace of wage growth is a threat to its longer-term inflation target of 2%.

“While the consumer prices index for July due tomorrow is widely expected to show a fall in the headline annual inflation rate, there are reported fears in Whitehall that subsequent months could reveal a plateau or even a tick back up in the rate. The inflation reading for September, or a possibly even-more racy wage growth figure, will determine what could be a very substantial rise in the state pension and reignite the debate over whether the triple lock is sustainable.

“The cost of the state pension is already expected to outweigh combined spending on education, policing and defence in the next two years. With neither of the leading parties yet willing to question the affordability of the triple-lock in the run-up up to a General Election, this could intensify the squeeze on the public finances.”

888 slips to loss as it moves away from UK big spenders

William Hill owner 888 slipped to a loss as UK revenue declined amid stricter regulations to protect vulnerable gamblers, but the business appears to have finally put a chaotic six months in past as it says the latest Gambling Commission probe into its activity will have no impact.

UK revenue was down by 3% to £615.3 million on a like-for-like basis for the business, which bought the country’s biggest high-street bookie William Hill last year. It said this was mostly due to a pivot towards lower-spending punters, as new rules were announced in April to ensure betting operators perform financial checks on those who spend more.

The group made a loss for the year thanks in part to high interest rates, having taken on substantial levels of debt for the acquisition.

The business has had a turbulent year, starting in late January when longtime boss Itai Pazner quit amid an investigation into the company’s anti-money laundering checks in the Middle East.

888  also paid the largest fine in UK gambling history earlier this year, for failings at William Hill that occured under previous ownership.

In June, a group named FS Gaming, including former Entain boss Kenny Alexander, bought a stake in 888, with the aim of making Alexander 888’s CEO.

However, those plans were scuppered when the Gambling Commission said it was reviewing 888’s licence, citing an HMRC bribery investigation into activities that occurred while Alexander was in charge of 888.

When the review was launched, 888 warned its licence was  at risk and said it  therefore  had  no choice  but to end talks about putting Alexander  in charge. With those talks ended, 888 today said it anticipates no impact from the review.

With the group having also paid a £2.9 million fine in GIbraltar, where its business aimed at the Middle East was based, it appears that a line may now  be drawn under a turbulent period.

M&S ups profits guidance, food sales surge 11%

Trading momentum at Marks & Spencer is continuing after the retailer today upgraded profit guidance for the 2023/24 financial year.

It has grown market share in both its clothing & home and food businesses, alongside good progress on the programme to reshape M&S.

The FTSE 250-listed company now expects interim results in November to show a significant improvement against previous expectations, with annual profits now set to be better than the 2022-23 performance.

However, it added: “There remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses.”

Like-for-like food sales grew by over 11% in the first 19 weeks of the financial year, with clothing & home sales up more than 6% despite “subdued growth” online. The level of stock going into the sale period was lower than planned.

M&S shares have risen by about 60% this year, aided by the likely return of dividend payments with November’s half-year results.

Nvidia leads Wall Street tech rebound, FTSE 100 seen higher

A return to form by Wall Street’s technology sector last night helped the Nasdaq Composite to close 1% higher and the S&P 500 by 0.5%.

Semiconductor firm Nvidia rose 7% after its shares were kept in Morgan Stanley’s “top pick” bracket, a move that boosted confidence in other mega-cap tech names.

The narrow nature of Wall Street’s rally was highlighted by the performance of Dow Jones Industrial Average, which closed Monday’s session broadly unchanged.

The FTSE 100 index finished 17 points lower yesterday as mining companies and Asia-focused stocks were unsettled by the ongoing storms in China’s property sector.

The Hang Seng index and Shanghai Composite traded in the red despite this morning’s unexpected rates cut by the People’s Bank of China but CMC Markets expects London’s top flight to open 14 points higher at 7521.

Unemployment and wage growth both rise faster than expected

UK unemployment rose to 4.2% in June, ahead of expectations, while soaring wages mean more interest rate pain could be on the way.

Analysts had expected the rate of unemployment to remain at 4%, but the rise suggests that the latest cycle of rate hikes is starting to put Britons out of work.

However, wages are continuing to rise at a pace that the Governor of the Bank of England Andrew Bailey has warned is too fast to keep inflaton under control. Latest figures show wages icluding bonuses were up by 8.2%. Excluding bonuses, wages are up by 7.8%. UK unemployment rose to 4.2%Both figures comfortably beat expectations.

That may mean more interest rate rises are on the way.

ONS director of economic statistics Darren Morgan said: “The number of unemployed people has risen again while the number of people working has fallen back a little. This is mainly due to people taking slightly longer to find work than those who started job hunting in recent months. The drop in those neither working nor looking for work is mainly among those looking after their family or home. Meanwhile the number of people prevented from working by long-term sickness has risen again to a new record.

“Job vacancies have now fallen over a quarter of a million since this time last year. However, they remain significantly above pre-COVID levels.

“Earnings continue to grow in cash terms, with basic pay growing at its fastest since current records began. Coupled with lower inflation, this means the position on people’s real pay is recovering and now looks a bit better than a few months back.”

China in surprise interest rate cut

The People’s Bank of China surprised markets this mornning with a cut to interest rates, in an effort to kick start an economy that’s been sputtering amid deflation and low domestic demand.

The central bank for the world’s second-largest economy was widely expected to hold rates, but instead lowered them by 0.15 percentage points.

It comes after days of disappointing economic and market news out of China. Yesterday, new fears hit the country’s property sector as shares in the country’s top developer Country Garden plummeted after trading of its bonds was suspended.

Robert Carnell, regional head of research for Asia-Pacific at ING, said: “From a macro perspective, today’s policy decisions are somewhat helpful. They will help improve the debt-service ability of cash-strapped local governments and property companies.

“But this isn’t a game-changing outcome, and so we doubt that market sentiment will dramatically improve just on this.

“More policy measures will be needed and more will certainly be delivered. The PBoC has not ended the rate-cutting cycle yet, and there will be further iterations of policy rate cuts along the lines of what we have seen today.”

The SSE Composite is down by 1% in Shanghai today, while the Hang Seng Index in Hong Kong is down by 1.25%.