Strong Earnings and Mixed Labour Data pick FTSE off its low

The FTSE opened lower on Wednesday, taking its lead from Wall Street overnight, which ended in the red for the fist session in 7 days. In a sea of red on the FTSE board, miners and banking stocks were standout performers following marker pleasing results from Lloyds and Glencore.  

Lloyds £1 billion share buy back 

Lloyds profits climbed an impressive 24% to £5.3 billion, the bank’s highest profits since 2006, in the year that it returned to private ownership as the government sold off its remaining share in May. The bank, which had always been a dividend machine before the financial crisis, was clearly keen to regain its status as a top pay-out share. 

Lloyds announced a £1 billion share buyback (1.4p per share), slightly higher than the £800-£900 that had been anticipated – a clear crowd pleaser made possible by its strong capital position. Elsewhere there were few surprises with PPI pay-outs hitting £1.65 billion and the announcement of a new digital strategy, including a £3 billion investment in technology. 

44% jump in profits at Glencore 

Glencore was also in a giving mood after the trader and miner announced a 44% jump in profits. Stronger commodity prices plus a strong unit cost performance produced led Glencore to its strongest performance on record. Whilst the results were in line with expectations, they also allowed Glencore to declare a dividend of $0.2, $700 million more than outlined by its new dividend policy.  

These results show that the miner trader has come long way since the dark days of 2015. The stock is in demand with the share price up close to 3% at 396p, as the share price continues to hover around levels last seen in 2013.  

Mixed UK Labour Data Pushes pound southwards 

UK unemployment unexpectedly ticked higher to 4.4% from 4.3%, whilst average earnings in the 3 months to December excluding bonus increased by 2.5%, ahead of the 2.4% forecast. However, this was counteracted by a downward revision for the previous months data to 2.3% from 2.4%.

Delving deeper into the figures, the data shows that wages picked up ass the number of foreign national in the workforce declined. Whilst wage growth is very slowly moving in the right direction, the squeeze on the consumer remains strong. 

Inflation is at an elevated 3% meaning that wages continue to fall in real terms. Negative wage growth has been a key point putting the breaks on the BoE from raising rates in the Spring. These figures will have done little to move the BoE perspective and the probability of a rate hike in May remains at around 65%. 

The unexpected increase in the unemployment rate caused the pound to drop 0.1% lower. GBP/USD is trading 0.4% down on the day with the bears targeting $1.39 

Other key events today include the appearance of BoE Governor Mark Carney, plus MPC members Braodbent, Haldane and Tenreyo defending the inflation report before the Parliamentary Treasury select committee. 

This event could see a few volatility producing comments for the pound. Finally, the big data piece for this afternoon will be the release of the FOMC minutes, which will be scrutinized more than usual, given the recent focus on higher US treasury yields causing the huge swings in the market over the past few weeks.