FTSE climbs, job vacancies fall & BHP reports record profits – Daily Market Brief, August 16, 2022

FTSE rises and GBP/USD remains below 1.2050 after UK unemployment holds steady at 3.8% but job vacancies fall for the first time in a year.

– German ZEW economic sentiment is expected to remain at a decade low

– BHP reports record full-year profits as coal and copper prices surged

– Oil falls to a 6-month low on demand concerns. API inventory data is due

The FTSE managed to book a gain yesterday, albeit a very small one, as losses from commodity stocks following weak Chinese data were offset by gains in defensive stocks in the healthcare and consumer staple sectors.

Wall Street also managed to post gains despite dire New York Empire manufacturing data, as investors turn their attention towards earnings from bellwether retailer Walmart later today and the minutes from the July Fed meeting tomorrow.

DAX

Today, European bourses are set to open higher after UK jobs data and ahead of German ZEW economic sentiment figures, which are expected to show that morale remains at a decade low.  Yesterday Germany announced a levy on gas which will come into effect in late October, adding further pressures to already struggling households and businesses. A recession in Germany appears almost impossible to avoid. Even so, the DAX continues to pick up from the July low of 12385 as it heads towards 14000.

UK jobs

The FTSE is also heading higher towards 7550, although GBP/USD remains sub 1.2050 following the release of UK labour market data. While unemployment held steady at 3.8% in June, and 73k new payrolls were created in July. Wages excluding bonuses ticked higher to 4.7%, up from 4.3% but still well below inflation. However, signs that the labour market is starting to cool are also appearing. UK job vacancies fell for the first time since August 2020, dropping by 19,800 to 1.27 million in the quarter through to July. This forward-looking measure adds evidence that the UK economy could be slowing as inflation remains stubbornly high at over 9%, and the cost-of-living crisis deepens.

BHP

The world’s largest miner posted record full-year profits with underlying earnings of $57 billion, boosted by surging commodity prices, particularly coal and copper. BHP accompanied the 16% rise in earnings with a reduction in debt and record free cash flow and announced that it would pay a record final dividend. BHP’s better-than-expected earnings come after rival Rio Tinto cautioned over a weaker outlook last month and halved its dividend. Interestingly BHP remains bullish on China, which typically accounts for around 60% of BHP’s revenue. BHP expects China to provide stability to global growth, offsetting weakness in growth elsewhere.

Oil

Oil prices are falling on Tuesday, extending losses from the previous session, hitting a six-month low. Oil tumbled 3% yesterday after data from China showed that the economic slowdown in the world’s largest importer of oil deepened in July, hurting the demand outlook for oil. Meanwhile, on the supply side, Saudi Aramco, the largest crude oil producer, said it could increase output. Today oil remains under pressure as investors also watch developments in talks to revive the Iran nuclear deal. Additional oil supply could enter the market if Iran and the US agree to an offer from the European Union, removing sanctions on Iranian oil exports.

Attention is also turning to API industry stockpile data due later today, which is expected to show both oil and gasoline stockpiles fell last week.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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