FTSE 100 to mark time as unemployment data quells early optimism

7.30am: Unemployment figures a mixed bag Britain’s unemployment rate rose to 4.5% in the June-August period, the Office for National Statistics (ONS) said, versus expectations of 4.3%. The rate was 0.6 percentage points higher than a year earlier and 0.4 percentage points more than in the previous quarter. Early estimates for September 2020 suggest that there is little change in the number of payroll employees in the UK - up 20,000 compared with August 2020. Since March 2020, the number of payroll employees has fallen by 673,000; however, the larger falls were seen at the start of the coronavirus (COVID-19) pandemic, the ONS said. Vacancies also show signs of a recovery, with a record quarterly increase in the recent period. After a record low of 343,000 vacancies in April to June 2020, there has been an estimated record quarterly increase of 144,000 to 488,000 vacancies in July to September 2020; vacancies remain below the pre-coronavirus pandemic levels and are 332,000 (40.5%) less than a year ago. Growth in average total pay (including bonuses) among employees for the three months June to August was unchanged from a year ago, while regular pay (excluding bonuses) growth was positive at 0.8%. Jack Kennedy, an economist at the global job site Indeed, said the pandemic’s human cost “is slowly being laid bare”. “The number of people claiming benefits has surged to 2.7 million and two-thirds of a million fewer people are working now compared to March and yet for all that, this is far from a labour market in freefall. New jobs are being created, and in the three months to the end of September, the total number of vacancies jumped at a record-breaking pace,” he noted. “Indeed’s data shows that the sector burning brightest is construction. A mini-boom in building has seen the number of construction jobs listed on the site jump by 267% between May and the start of October,” he added. Samuel Tombs at Pantheon Macroeconomics said the damage from COVID-19 is now becoming much clearer following revisions to the data after the ONS realised its data collection methodology, which changed as a result of lockdown restrictions, was overly favouring homeowners rather than renters. “Following re-weighting, the ONS estimates that the three-month rolling measure of employment in August was 1.5% below its March peak, greatly exceeding the mere 0.5% shortfall in July under the old methodology. That resolves some of the discrepancy with the new PAYE data, which show that the number of payroll employees was 2.4% below its January peak in September, despite edging up by 0.1% from August’s level. The remaining discrepancy appears to reflect some households still believing that they have a job waiting for them, but who have not received pay recently,” Tombs said. “Looking ahead, it remains likely that job losses will accumulate in October, ahead of the wind-down of the Coronavirus Job Retention Scheme at the end of the month. The ONS’s Business Impact of Covid-19 found that 9.4% of employees still were on the furlough scheme in the two weeks to September 20. The successor scheme, the Job Support Scheme, will do little to hold back the tide of redundancies, as it requires firms to make up one-third of the shortfall in pay of any former full-time workers that they employ on a part-time basis, so that the employee also receives a wage contribution from the government,” Tombs observed. “Firms that are currently struggling, therefore, are better off employing only a few staff members full-time, instead of attempting to preserve headcounts by employing many workers part-time. Meanwhile, staff that are fired will struggle to find work, given that the official measure of job vacancies still was down 39% year-over-year in September, unchanged from August.,” he noted. The FTSE 100, which had been expected to open around 20 points higher, is now expected to start little changed. 6.50am: Footsie to rally The FTSE 100 is expected to enjoy a rebound at Tuesday’s open tracking gains by US stocks, though UK unemployment numbers could sour the mood. London’s blue-chip benchmark was called 20 points higher to 6,023 by traders at spread-betting platform IG, a day after the index fell 15 points or 0.25%. Overnight on Wall Street, the Dow Industrials Average Jones added over 250 points, or 0.9% to 28,837.52, with the S&P 500 jumping 1.6% and the Nasdaq Composite surging 2.6%. The US stock indices are not far off their all-time highs hit early last month. “Yesterday’s move higher in US markets appears to be predicated on the belief that whoever wins in next month’s Presidential election, there will be a sizable fiscal stimulus package coming down the pipe, with the only unknown being around the size of any deal,” said Michael Hewson at CMC Markets “While this seems an eminently sensible point of view, after all whoever takes over will have enormous challenges to deal with, the reality is that a Biden presidency will in all likelihood see a lot of new regulation and red tape, which could well hit the Big Tech sector disproportionately, something that investors appear content to ignore for the time being.” For investors focused on the UK, at 7am the latest snapshot of the UK labour market will land. It’s likely to be “a sobering read”, said Hewson, with unemployment numbers showing show more of the fallout effects of the coronavirus pandemic. The ILO unemployment rate is expected to rise to 4.1% from 3.9% and the Office for National Statistics has also said that a change of methodology in the latest numbers could well see the headline number jump quite sharply, with a number above the 4.3% consensus a real possibility. Around the markets: Pound: down 0.1% to US$1.3051 Gold: down 0.4% to US$1,916.54 Oil: Brent crude down 0.4% to US$41.88 6.45am: Early Markets - Asia/Australia Asia-Pacific markets were mixed on Tuesday even as China’s exports hit a record in September by rising 9.9% compared to a year ago. However, the Shanghai composite had shed about 0.23% by noon as the growth in exports fell short of analyst expectations of a 10% year-on-year growth as per a Reuters poll. Hong Kong’s stock market were closed today as a tropical storm prompted authorities to shutter businesses and close schools. In Japan, the Nikkei 225 added 0.11% while South Korea’s Kospi declined 0.33%. Australia led gains among the region’s major markets, with the S&P/ASX 200 rising about 1.2% to hit a new seven-month intra-day high. READ OUR ASX REPORT HERE Proactive Australia news: Anson Resources Ltd (ASX:ASN) has been as much as 25% higher after identifying three major targets at The Bull Project in Western Australia, which adjoins the high-grade Julimar nickel-copper-PGE discovery made by Chalice Gold Mines (ASX:CHN). Twenty Seven Co Ltd (ASX:TSC) has finished drilling of 33 holes for 2,043 metres testing four main areas for gold at the Rover Project in WA’s Goldfields. Predictive Discovery Ltd (ASX:PDI) has hit up to 92 metres at 1.9 g/t gold in diamond drilling at the flagship Bankan Project in Guinea, demonstrating a large gold mineralised body which may contribute to a planned mineral resource estimate in mid-2021. Comet Resources Limited (ASX:CRL) has revealed a maiden 88,600-ounce JORC-compliant mineral resource estimate for Santa Teresa High-Grade Gold Project in Baja California, Mexico. Auroch Minerals Ltd (ASX:AOU) has detected a strong off-hole conductor coincident with the base of the modelled channel after completing down-hole electromagnetic (DHEM) surveys on reverse circulation (RC) drill holes at Valdez prospect, which is part of the Leinster Nickel Project in Western Australia. American Rare Earths Ltd (ASX:ARR) is focused on transforming from explorer to developer with its world-class La Paz Rare Earth Project in Arizona, USA, as the sector continues to evolve and domestic supply is prioritised in the US. Marvel Gold Ltd (ASX:MVL) is confident of the potential of its advanced exploration projects in West Africa, with the recent release of the JORC mineral resource estimate for Tabakorole Gold Project and a 3,800 metre systematic drilling program underway at Lakanfla Gold Project. King River Resources Ltd (ASX:KRR) continues to enhance a pre-feasibility study (PFS) assessing the production of high-purity alumina (HPA) from Speewah Specialty Metals Project in the Eastern Kimberley region of Western Australia. Tempest Minerals Ltd (ASX:TEM) expects to begin drilling this week at its 100%-owned Warriedar West Gold Project in Western Australia targeting intrusion-related gold system (IRGS) mineralisation.