FTSE 100 goes into reverse, UK jobs data leaves rate cut decision finely balanced, Apple fails to win over the market with new product launches, takeover offer for gold producer Centamin

“The FTSE 100 went into reverse on Tuesday, despite some modest gains in the US overnight,” says AJ Bell Investment Director Russ Mould.

“The move hints at some lingering nervousness in the market after an up and down period for global stocks since the start of August.

“Tomorrow’s US inflation figures could be the next key test of investor sentiment with the market likely to want the reassurance of a number which is broadly in line with expectations, rather than anything which is either way under or way above what has been pencilled in.”

UK Jobs Market

“The latest UK jobs figures suggest a labour market which, like a newly baked cake set in front of a group of kids, is cooling, but not quite as fast as the Bank of England might want in order to press the accelerator on rate cuts.

“UK wage growth fell to its lowest level since the quarter to July 2022 but, even in real terms, pay is still up considerably more than the Bank’s 2% inflation target. Although most of the data was in line with expectations, a tick lower in the unemployment rate and a much bigger increase in the number of people in employment does hint at some continuing tightness in the jobs market. This leaves the Bank’s decision making finely balanced ahead of its meeting next week.

“The ONS acknowledges some volatility around its numbers and this is not the only jobs data out this week with the accountancy group BDO releasing data suggesting August was the worst month for the UK labour market since 2013.

“Another significant takeaway from today’s ONS report is the 4% increase in overall wages which will feed into the uplift in the state pension. The increase will be less than pensioners have seen in recent years.”

Apple

“Apple’s big product launch event failed to excite the market, leaving its share price as flat as a phone with an empty battery.

“At face value, some of the initiatives look interesting. A new version of the iPhone with a camera button on the side is a smart move as that should appeal to wannabe influencers eager to capture every moment.

“The incorporation of AI into the phone is also a good step forward, so are the enhancements to its air pods. Unfortunately for Apple, competitors are already one step ahead of the game with AI.

“There is a danger that Apple becomes the imitator, not the trend setter. It cannot afford to be in that position from a reputational perspective. Apple built its empire through innovation and being at the cutting edge of technology. It needs to work harder to stay on top.”

Centamin

“A takeover of Centamin represents the end of an era for mid and large-cap gold miners on the UK stock market.

“Centamin is one of the last pure-play gold producers remaining on the London Stock Exchange. While there are plenty of tiny exploration companies hoping to strike it rich, few have enjoyed Centamin’s level of success and built a large-scale operating mine.

“Over the years, gold producers of any notable scale have been snapped up by rivals or merged with others, leaving investors with limited options on the London Stock Exchange and effectively making them look at overseas stock markets for a broader range of gold miners.

“Names like Randgold Resources, once a FTSE 100 constituent, are now long gone from London and, if AngloGold Ashanti is successful in buying Centamin, it would leave Endeavour Mining as the only big primary gold producer left on the UK stock market, along with silver producer Fresnillo which also digs up gold.

“It’s surprising we’ve had to wait this long for someone else to make a serious offer for Centamin since Endeavour tried to buy it in 2019. Centamin owns a gigantic gold mine in Egypt called Sukari, which is the company’s jewel in the crow. Sukari is the type of deposit that most gold producers dream of finding but never do. Often it is easier to buy a proven deposit than spend years looking for one.

“Centamin has continued to extend the life of the Sukari mine and no doubt AngloGold is hoping to keep the production wheels turning for at least another decade on the asset.

“AngloGold’s takeover offer for Centamin has come at an interesting time for the gold mining sector. Shares in many operators have lagged the rising gold price because cost inflation has compressed profit margins. These inflationary pressures are now starting to ease, which implies that margins will start to go up, and investors might be willing to pay a higher multiple of earnings to own the shares. Therefore, gold miners feeling more confident about the future might be more willing to make acquisitions, meaning that Centamin’s takeover may not be the only one we see in the sector over the next six months or so.”

These articles are for information purposes only and are not a personal recommendation or advice.