MARKET WRAP: FTSE ends lower, UK unemployment drops to one year low

imageEconomy4 hours ago (Oct 12, 2021 16:35)

© Reuters.

Key Points

  • FTSE 100 closing price of 7,130.4, -0.2%
  • EasyJet falls as FY loss set to exceed £1 billion
  • Ocado inks deal with Kroger to power fulfilment centres
  • UK jobs figures “pave the way” for BoE hike
  • US Dollar Index hits highest since September 2020
  • Crude prices steady
  • Bitcoin hits highest level since 12th May

By Samuel Indyk – The FTSE 100 ended the session lower amid broad-based weakness across most European bourses, with inflation, or even stagflation, fears continuing to impact sentiment.

However, it’s difficult to suggest that the UK is facing the threat of stagflation following the latest labour market figures. A reminder that stagflation is a situation with high inflation, slowing growth, and steadily high unemployment.

The unemployment rate dropped to 4.5% in the latest month, according to data from the Office for National Statistics. Meanwhile job vacancies rose to 1.1 million between July and September and the number of employees on the payroll increased to 29.2 million.

The data will do little to deter the more hawkish members of the Bank of England’s Monetary Policy Committee from favouring an interest rate hike in the coming meetings.

“The jobless rate is at a fresh one-year low with a drop in the rate of economic inactivity and a fall in redundancies,” said interactive investor Head of Investment Victoria Scholar. “The latest labour market figures pave the way for an imminent interest rate rise from the Bank of England with markets pricing in around a two-thirds chance of a hike before year-end amid rising commodity prices and a strengthening employment picture.”

In corporate news, EasyJet (LON:EZJ) was in focus after saying it expects a loss greater than £1 billion for the second consecutive year. The company added that it plans to fly 70% of 2019 levels in its first quarter of the financial year up from 60% previously.

Ocado (LON:OCDO) shares rallied, receiving some much needed respite, after the company announced it had inked a deal with US grocer Kroger (NYSE:KR). Ocado, which has seen shares fall over 40% from the peak in September 2020, will power new Kroger fulfilment centres allowing more Kroger customers to experience Kroger Delivery.

The USD edged higher as the benchmark United States 10-Year yield held firm above 1.60%. Focus is turning to a 10-year note auction at 18:00BST, the first auction of 10-year paper since the Senate agreed a temporary increase of the government’s borrowing limit until December. GBP/USD remained anchored to 1.36 despite the strong labour market figures.

WTI and Brent crude futures were both relatively steady near recent multiyear highs.

“With no sign that OPEC+ intends to increase production further, there is a risk of a move towards $90 a barrel,” said CMC Markets Chief Market Analyst Michael Hewson.

Bitcoin was also relatively steady on Tuesday after a strong run in recent weeks. The world’s largest cryptocurrency hit its highest level since 12th May before paring gains as momentum waned.

“We have seen it [Bitcoin] start to lose momentum on approach to $60,000 which is the next psychological barrier to the upside,” wrote OANDA Senior Market Analyst Craig Erlam. “But longer-term, there appears to be plenty of support behind the Bitcoin rally which may point to new all-time highs in the not-too-distant future.”


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MARKET WRAP: FTSE ends lower, UK unemployment drops to one year low

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