FTSE 100 hits record high; UK strike disruption highest since 2011 – business live

The tailwinds from another decent market performance in the US overnight have given the FTSE 100 another boost this morning, Richard Hunter, head of markets at interactive investor, tells us.

He also points out that the FTSE 100 is not a gauge of the UK economy….

The index continues to attract investment interest with its exposure to banks and energy companies still seeing the benefits of rising interest rates and a recovering Chinese economy respectively. At the same time, its proliferation of defensive, and in some cases somewhat inflation-proof stocks, along with an average dividend yield of 3.5% all add to its attractions as a potential investment destination of choice.

Perhaps most importantly, the index is not an accurate barometer of the UK economy. An estimated 75% of company earnings come from overseas which, coupled with the more recent weakness in sterling, means that these earnings become more valuable on repatriation.

These combined factors resulted in a strong outperformance compared to many other global indices last year. In 2022, for example, the main indices in the US plummeted – the Dow Jones was down by 8.8%, the S&P500 by 19.5% and the technology-heavy Nasdaq by 33.1%. The FTSE 100 eked out a gain of 0.9% (excluding dividends) and is now ahead by over 7% in the year to date.

Last week we learned that the UK economy stagnated at the end of 2022, with no growth in the October-December quarter.

The market is not the economy, rather it is a discounting mechanism which aims to anticipate future events, both economic and corporate, Hunter explains:

If inflation and interest rates are peaking, and if company earnings continue to show resilience in the face of the economic challenges to come, the relatively cheap valuation of the index compared to many of its global peers could leave this rally with further to run.

The strength of the FTSE 100 is therefore positive news for investors as well as its constituents, which happened to be based in the UK, as opposed to the performance of the UK economy itself.”

Car giant Ford has said it is cutting around 3,800 jobs across Europe, including 1,300 in the UK, over the next three years.

That’s a fifth of its total workforce in the UK, the BBC reports.

The reduction in product development and administration jobs is as part of an overhaul as Ford battles rising costs and pivots its production towards electric vehicles.

Around 2,300 jobs will be cut in Germany, and 200 in the rest of Europe, the company said, adding it intends to achieve the reductions through voluntary separation programmes.

The American carmaker will retain around 3,400 engineers in Europe who will build on core technology provided by their U.S. counterparts and adapt it to European customers, European passenger electric vehicle (EV) chief and head of Ford Germany Martin Sander said on a press call.

Sander added:

“There is significantly less work to be done on drivetrains moving out of combustion engines. We are moving into a world with less global platforms where less engineering work is necessary.

This is why we have to make the adjustments.”

In the City, the UK’s blue-chip share index has hit a new record high, as it continues to rally in 2023.

The FTSE 100 index has jumped by 36 points, or 0.45%, to 7986 points – its highest point on record.

The FTSE has now gained 7% so far this year, as markets have been lifted by hope that inflation may have peaked, meaning central banks may slow their interest rate increases.

The index hit its first record high since 2018 at the start of this month.

Traders are hopeful that US inflation fell last month – we get January’s CPI report at 1.30pm UK time.

Mobile operator Vodafone is among the top FTSE 100 risers, up 1.8%. Yesterday, US telecoms group Liberty Global announced it had taken a 5% stake in Vodafone in a bet on the UK company’s revival – but has ruled out making a takeover bid.

The FTSE 100 has also started the week on a very positive note, says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:

There is a great deal of attention going on US and UK inflation data this week, with hopes that the Federal Reserve is going to stick to the hymn sheet when it comes to the expected 25 basis point increase in interest rates expected in March.

She warns, though, that the UK’s market mood can change “on a dime”:

Although the economy’s holding up well for now, there are still question marks hanging over corporate margins and consumer spending power, which the forward-looking FTSE may not have correctly priced in.

Full story: Nearly a million days lost to strikes in December in UK

Richard Partington

Almost a million working days were lost to strikes in December as real-terms pay growth last year dropped at among the fastest rates for more than 20 years, my colleague Richard Partington reports.

The figures from the Office for National Statistics add to the squeeze on households amid the cost of living crisis.

It said 843,000 working days were lost in December, the highest monthly figure for more than a decade, amid rolling strikes involving NHS, rail and Post Office workers, and elsewhere across the economy.

ONS figures also showed that real-terms pay, excluding bonuses, fell by 3.6% in the three months to December, among the largest falls since comparable records began in 2001.

Here’s the full story:

Guy Opperman MP, minister for employment, is cheered by the rise in employment in the last quarter:

It’s encouraging to see that more people are moving into work, as we know that being in employment is the best way to deliver financial security, skills and confidence.

We’ve also made huge progress for everyone looking to boost their earnings or land a new role, with the employment rate increasing and more people joining payrolls.

Growing the economy is one of our top five priorities which will deliver more high quality jobs, boosting everyone’s prospects and prosperity.

But Rachel Reeves MP, Labour’s shadow chancellor, is concerned that wages continued to lag inflation. She says:

Britain has huge potential – but 13 years of the Tories has left real wages down, families worse off, and our economy lagging behind on the global stage.

The government needs to stop sitting back and following this path of managed decline.

Labour will get people back into work, with our real plan for growth to create good, new jobs across every part of our country.

UK workers have now suffered 15 miserable years of real wages, says Stephen Evans, chief executive at Learning and Work Institute:

Real earnings are falling at their fastest rates since the financial crisis due to high inflation, leaving them no higher now than before the pandemic. A miserable 15 years for real wage growth means people would be earning £11,000 a year more on average if pre-financial crisis trends had continued. So as well as bringing inflation under control, we urgently need a growth plan for our economy.

Evans adds that the fall in economic inactivity at the end of 2022 is welcome… but was driven more by a reduction in young people studying than older people returning to the labour market.

He adds:

Economic inactivity is still 500,000 higher than pre-pandemic, and almost 2.5 million people are out of the labour market due to long-term sickness. Only one in ten out-of-work older people and disabled people get help to find work each year, the Chancellor must change that in next month’s spring budget.

Here’s Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), with the key points from today’s UK jobs report:

The last quarter of 2022 saw fewer people remaining outside the labour market altogether, with some moving straight back into a job and others starting to seek work again.

This meant that although employment rose again, unemployment edged up also.

Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period.

Overall pay, though, continues to be outstripped by rising prices.

Though still at historically very high levels, job vacancies have dropped again, with a particularly sharp fall from the smallest employers.

The number of working days lost to strikes rose again sharply in December.

Transport and communications remained the most heavily affected area, but this month there was also a large contribution from the health sector.

The number of vacancies across the UK has fallen, as companies hold back their hiring plans as the economy slows.

There were 1.134m vacancies in the November-January quarter, the Office for National Statistics reports. That’s a decrease of 76,000 from August to October 2022 – the seventh quarterly decline in a row.

Vacancies fell at 16 out of 18 industry sectors during the quarter, and were 135,000 lower than a year ago.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The wave of UK strike action at the end of last year was the most disruptive in over a decade, the latest employment data shows.

The Office for National Statistics has reported this morning that 843,000 working days were lost because of labour disputes in December 2022, the highest for any month since since November 2011.

Key services across the UK were hit by industrial action during December, as workers pushed for pay rises that kept up with UK inflation. Railway workers, Royal Mail staff, border force staff and nurses were among those taking strike action.

Today’s labour market report also shows that basic pay grew at the the fastest rate on record, outside of the Covid-19 pandemic period.

Regular pay (excluding bonuses) rose by 6.7% per year in the October-December quarter.

That may alarm the Bank of England, as it tries to bring UK inflation down from double-digit levels towards its 2% target.

The ONS says:

For regular pay, this is the strongest growth rate seen outside of the coronavirus (COVID-19) pandemic period.

Growth in average total pay (including bonuses) slowed a little, to 5.9%.

Public sector pay lagged behind private sector employees, though. Average regular pay growth for the private sector was 7.3% in October to December 2022, and 4.2% for the public sector.

But once you adjust for inflation, pay actually fell.

In real terms (adjusted for inflation), total pay shrank by 3.1% while regulay pay fell by 2.5%. This is one of the biggest falls on record.

The ONS says:

This is smaller than the record fall in real total pay we saw in February to April 2009 (4.5%), but remains among the largest falls in growth since comparable records began in 2001.

Today’s labour market also shows that the unemployment rate remained near at record low, at 3.7%.

Also coming up today

Investors are poised for the latest US inflation report, due at 1.30pm UK time.

It’s expected to show that the cost of living squeeze eased, with the consumer prices index dropping to 6.2% per year from 6.5% in the year to December.

A sharp drop in inflation would clearly be welcomed by the markets, as it could encourage US central bankers to slow their interest rate increases.

Wael Makarem, senior market strategist at trading platform Exness, says:

This could be a critical data point for the dollar and other assets in particular after the Federal Reserve slowed the pace of its interest rate increases and the surprise over the US job market’s figures.

Inflation in the US has been declining on a year-on-year basis, pushing the US central bank to review its policy. However, a surprise tomorrow could alter expectations. Higher-than-expected inflation figures could reinforce the case for higher interest rates for a longer period of time, which could push the US dollar higher. In any case, higher volatility could be expected.

The agenda

• 7am GMT: UK labour market report

• 10am GMT: Eurozone GDP report for Q4 2022 (second estimate)

• 1.30pm GMT: US inflation report for January