FTSE 100 steady after UK jobs numbers suggest loosening in the labour market, ScS takeover bid and Barclays’ downgrade to key profit measure drags banks lower

“The FTSE 100 was steady on Tuesday morning as UK jobs numbers suggested further loosening in the labour market,” says AJ Bell Head of Financial Analysis Danni Hewson.

“With banks on the back foot thanks to Barclays mixed quarterly results, the miners were doing the heavy lifting for the UK’s flagship index as they moved higher on positive analyst commentary.”

UK Jobs Figures

“Changes to the way the numbers are crunched aside, figures out this morning from the ONS show a deteriorating picture in the UK jobs market. This should, in theory, reduce the pressure on the Bank of England to push interest rates higher.

“However, put simply, there are fewer people in work. The number of those in the troubling ‘economically inactive’ bracket has risen and, as we learnt last week, vacancy numbers have fallen again.

“The balance seems to have tipped from a robust post-pandemic labour market with employers desperate for workers to vacant fill positions to one that’s shrinking as companies look to cut costs and nerves about the country’s economic trajectory set in.

“After eighteen months of pay increases, wage bills are weighing on company margins already squeezed by other cost pressures.

“Uncertainty about the trajectory of inflation, how long interest rates will have to stay high and a nagging question about whether those rates really have peaked is causing companies to rethink investment and delay expansion plans.

“There is always a lag when it comes to the impact of measures designed to interrupt the economic status quo and the steady increase in borrowing costs has taken time to exert its grip.

“This latest jobs update shows that the pressure is having an impact and cracks are widening.”

ScS

“It says something about the prospects for selling big ticket items that shareholders in sofa seller ScS are likely to welcome a premium-priced bid from an Italian rival with open arms despite the bid being pitched some way below the stock’s 2021 highs.

“Back then a large number of people had both the capacity and willingness to shell out on new seating for their living rooms – now budgets are tighter and spending priorities have shifted.”

Barclays

“Net interest margin is the metric the banks are judged on so it is not a surprise to see Barclays heavily punished for downgrading guidance here even if profit for the third quarter was ahead of guidance.

“It’s never a particularly palatable message for shareholders to hear a business is going to be less profitable. While the banks were seen as beneficiaries of higher interest rates, and perhaps were for a time, the competitive and regulatory pressures to match increases in the cost of borrowing with rates offered for cash on deposits mean this benefit has not proved long lasting.

“On top of this the rate of bad debts is creeping up as households and businesses continue to contend with inflationary pressures and higher borrowing costs.

“For Barclays at least, traditional banking is only a part of the business and it is no surprise to see rivals Lloyds and Royal Bank of Scotland, for whom this is their core, dragged lower in the wake of today’s news and ahead of their own third quarter updates later this week.

“The performance of its corporate and investment banking arms is not particularly encouraging either though, with market volatility hitting activity levels.”

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