FTSE 100 closes at record high after UK jobs data, Lloyds and Abrdn surge, Qinetiq slumps

FTSE 100 advances 28 points to 8,548

Lloyds and Close Bros shares jump on motor finance report

Mid-cap updates from Abdrn, Cranswick, Marston’s, 4imprint, Elementis

US stock markets reopen after long weekend, Trump inauguration

4.45pm: Another FTSE record high

The FTSE has notched up a record closing high of 8,548.29, rising 28 points or 0.3% over the day, while also hitting an intraday high of just over 8,550.

Lloyds Banking Group PLC was the highest riser, climbing 4% on reports that Chancellor Rachel Reeves plans to intervene to limit losses from the motor finance inquiry.

Helped by a seven-week high for gold, Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) is second on the blue-chip leaderboard, up 3%.

Among the index’s top 20 largest companies, there were 1%-plus gains for AstraZeneca, National Grid, Barclays and BAE Systems, while miners Rio Tinto and Glencore were among the bigger fallers, both down over 1.3%.

AB Foods, Rightmove, Sainsbury’s and Haleon were also notable consumer-facing fallers.

After the pound and euro were squished by the US dollar earlier, both have found support and the greenback has had its gains pared back over the day.

4.05pm: Stock indices near highs

While European stock indices showed a mixed reaction the day after President Trump’s inauguration, both the FTSE 100 and DAX 40 have stayed close to their record highs despite tariff uncertainty, UK and German data, says Axel Rudolph, analyst at online trading platform IG.

He notes that passenger car registrations in the EU hit a six-month high and German investor morale fell more than expected, while UK pay growth and unemployment both rose.

Pay growth accelerated the most in six months with unemployment edging up to 4.4% while payrolls plunged the most since 2020.

Trump’s policies are taking centre stage, Rudolph reckons, as the threat of possible 25% US tariffs on imports from Mexico and Canada as soon as 1 February provoked a sharp sell-off in the euro and pound earlier, with the Mexican peso moving towards a three-year low.

Treasury yields and UK gilt yields have slid lower alongside the dollar giving back its earlier gains.

3.23pm: First Saba investment trust vote tomorrow

Looking forward, tomorrow brings the spotlight to the investment trust sector, with the first of the shareholder meetings that US raider Saba Capital has called at one of the seven trusts it has targeted.

Having been steadily accumulating shares of between 19% and almost 30% in the seven London-listed investment companies, the hedge fund has called meetings to replace members of the independent boards with its own nominees.

Tomorrow’s vote for Herald Investment Trust (LSE:HRI) is a key test, with the other six coming not long after.

Analysts at Stifel say: “Whilst the market’s focus in the next three weeks is likely to be on the outcomes of the general meetings, we think the more important issue is what happens afterward.

“We think it is possible Saba may win the votes at two or three trusts, primarily as a result of a low turnout by the predominantly private investor base.

“However, even for the trusts that defeat Saba’s proposals, this will certainly not be the end of the matter.”

Stifel reckons it is likely to be the beginning of a longer drawnout battle.

2.56pm: US starts mixed

Wall Street has opened in fairly strong fashion, or you could say mixed, with the small-cap Russell 2000 leading the way, but a fall for Apple Inc having dragged the Nasdaq into the red.

The S&P 500 is up 0.3% to 6,022.71 in initial trading, though still a little way from last year’s all-time high of just under 6,100.

Small-caps were the early standout, with the Russell index climbing 1.4% initially but pared back slightly now, followed by the Dow Jones’s 0.6% rise.

The tech-heavy Nasdaq Composite gained initially but just fell marginally into negative territory due to Apple’s 3.5% fall. Tesla is also a weight, down 3.4%.

Biggest gainers on the S&P were Moderna, up 7.2%, followed by Charles Schwab, 3M, Vistra Energy, Steris and Warner Bros.

2.36pm: Big test for gold, at seven week high

Gold is the most expensive it’s been since early November.

This morning, the price of gold has risen to $2,730 an ounce, a seven-week high.

“We have seen a notable divergence between gold and oil as Trump declared a national energy emergency that could see the country dramatically increase oil & gas production,” says market analyst Josh Mahony at Scope Markets.

“The hope is that this push for higher oil output will curb inflation and allow for greater easing from the Federal Reserve, with gold pushing into a two-month high as a result.”

David Morrison at Trade Nation says its a key market to watch.

“While gold looks as if it’s on course to retest its old highs, it is currently bumping up against significant resistance in the $2,720 area. This is where prices were unambiguously rejected on two major failed rallies, one in late November, and the second in early December.

“This is a big test for the gold bulls,” says Morrison.

2.31pm: Investing in the UK

The US followed by the UK are the most favoured destinations for investment this year, according to a survey of CEOs by accountant PWC.

Britain was tipped to receive 14% of international investment compared to 12% for Germany, 9% for China and 7% for India.

The US was miles out in front with the CEOs tipping it to receive 30% of the investment pot.

In another boost to embattled Chancellor Rachel Reeves, 61% of home-based chief execs said they were optimistic about prospects for the country against 31% a year earlier.

2pm: Mid-cap movers and reaction

Most of the big movers in London today are FTSE 250 mid-caps who put out updates earlier.

Abrdn PLC shares are up 4.5%.

“Rome was not built in a day, but someone had to break ground sometime,” says analyst Rae Maile at Panmure Liberum.

“Similarly, abrdn will not be rebuilt quickly but it has to start putting in some quarters where things are a bit better than not and in Q4/24 it has done exactly that.”

Maile says net flows were better than he hoped for, and not just because of liquidity, “while the known issues in Adviser are no worse than feared and ii has continued to grow well.

“There is plenty of value in the business if management delivers, and the signs of that are a bit better.”

Shares in pub company Marston’s PLC are down 3.6% after its first-quarter update to 18 January showed like-for-like sales up 2.0% over the 16 weeks, against an 8.1% comparative from a year ago, and said it is “well placed to deliver FY25 market expectations”.

Douglas Jack at house broker Peel Hunt says: “We are holding our PBT forecasts, which we upgraded by 2-3% in November. “We believe they are cautious in relation to our assumptions for interest cost reduction and margin growth, with the latter lagging guidance.”

WAG Payment Solutions PLC (LSE:WPS) is down 4.6% after it reported revenue growth of 13.8%.

Gautam Pillai at house broker Peel Hunt says this was slightly below his estimates and the City consensus.

Eurowag’s outlook to grow revenues by low double digits with stable EBITDA margins, which Pillai says is “in line with our expectations” but guidance about incremental capex investments is likely to weigh on free cash flow.

QinetiQ Group PLC (LSE:QQ.) is the biggest faller still, down almost 10% now but analyst Jamie Murray at Shore Capital says while the earlier update was “mixed”, he remains constructive on the medium term opportunity, “and so would buy any dip“.

12.47pm: US stocks pointing to higher start

European stock markets are mostly in the red, though only slightly, while US futures are firmly in the green.

The FTSE 100 is just below flat, while Germany’s DAX is the same, with Spain’s IBEX and Italy’s FTSE MIB both sitting around 0.5% lower.

France’s CAC 40 is the exception now, up 0.1%, supported by gains for luxury names LVMH and Hermes International.

The Euro Stoxx 600 is up 0.1%.

Across the pond, Nasdaq 100 futures are up almost 0.5%, followed by the Dow Jones and S&P 500.

12.25pm: Where is the market ‘wrong’?

“Markets often behave inconsistently, with patterns that don’t make obvious sense between asset classes,” says Deutsche Bank macro strategist Henry Allen.

He notes the quote from John Maynard Keynes who said that “markets can remain irrational longer than you can remain solvent”.

Allen says this got his team thinking about what some of the biggest dislocations today, “considering what looks odd, and therefore what might be ripe for a correction”.

Ones that sprung to mind were markets still pricing in Fed rate cuts even as they also expect inflation to linger above target, while another in the UK is there was “an interesting divergence” between sterling and gilts, which have underperformed, whilst sterling investment grade spreads are around their tightest levels since the global financial crisis.

Other disclocations are that “markets aren’t fully accounting for Trump’s tariff threats”, whilst US equity valuations “have never been this high with growth this comparatively weak”.

12.02pm: Let’s avoid race to the bottom on trade, says EC prez

Europe and other trade partners must “work together to avoid a global race to the bottom”, European Commission President Ursula von der Leyen has said while warning China and the US about creating trade distortions.

Giving a speech at the World Economic Forum in Davos, she warned of a “China shock” to world trade caused by “state-sponsored over-capacity”.

Von der Leyen also highlighted how many American jobs depend on European trade and made a case for strengthening the trading relationship.

“No other economies in the world are as integrated as we are,” she said, noting that European companies in the US employ 3.5 million Americans, with another million American jobs depending directly on trade with Europe.

“Europe imports twice as many digital services from the US as we do from the entire Asia-Pacific. Of all American assets abroad, two thirds are in Europe. And the US provides over 50% of our LNG,” she said.

“A lot is at stake for both sides. So our first priority will be to engage early, discuss common interests, and be ready to negotiate,” von der Leyen said.

The EC president said supply chain dependencies are “at times weaponised”, as shown by Russia cutting off energy to Europe after sanctions were imposed following the invasion of Ukraine.

Global competition for access to raw materials, new technologies and global trade routes remains high, von der Leyen said, and she expects to see frequent use of sanctions, export controls and tariffs “intended to safeguard economic and national security”.

“But it is important that we balance the imperative to safeguard our security against our opportunity to innovate and enhance our prosperity,” she added. “In this spirit, we will need to work together to avoid a global race to the bottom.”

11.21am: FTSE flattened

The FTSE 100 has fallen into the red now, and the FTSE 250 has climbed higher.

Miners, including Anglo American, Glencore and Antofagasta, are dragging on the Footsie, along with Sainsbury’s, AB Foods and Rightmove.

Leading the mid-cap index is 4imprint Group Plc (AQSE:FOUR), which reported a trading update.

Analysts at Peel Hunt said it was “another steady statement from 4imprint. Even though uncertainty over US tariffs remain, the business is performing resiliently. Margins are holding up well and cash is building up.”

The pound has fallen further against the dollar, now down 0.65% at 1.2237.

US futures are pointing to a higher start, with the S&P 500 set to edge up 0.3% towards record highs, and the tech-powered Nasdaq to climb 0.4%.

10.42am: UK’s big economic questions

Economists at ING have provided their answers to the big economic questions about the UK – whether HM Treasury be forced to cut spending in March, and are taxes going up again – and would that be enough to ease fears in bond markets? And how quickly will the Bank of England be able to cut interest rates this year?

With global government, bond yields rising over recent weeks, this has shone the spotlight back on the UK government’s decision to dramatically ramp up spending in its Autumn Budget, which “left little margin for error” – or “fiscal headroom”.

“Recent market moves will have eroded some, if not all, of that margin,” ING’s James Smith says.

“That doesn’t mean the recent rise in yields will have a huge impact, big picture. But two things can be true at once, and the Chancellor’s headroom could still be easily wiped out, simply because there was barely any in the first place.”

Technically speaking, Smith says, ahead of the March budget statement, the Treasury will privately receive feedback from the OBR on whether or not it has run out of headroom.

“And if it has, it will have to make changes accordingly. No Chancellor is going to stand up and concede that it has run out of fiscal space.

“But change is not as difficult as it sounds. Remember the fiscal rules are based not on actual budget deficits/surpluses right now, but where they’re projected to be in five years’ time. That allows for plenty of creative accounting about what the future holds.”

Smith notes that then-Chancellor Jeremy Hunt won round investors and the OBR after the Truss ‘mini budget’ crisis by promising big real-term spending cuts to various government departments in three to five years’ time.

Convincing markets will be hard, but “much will depend on the state of global bond markets” in March, and for the time being, gilt yields “will continue to get their cue from US interest rates, and thus the next move will likely come from US economic data and Trump’s policy actions”.

“At some point, most likely in the autumn, the Chancellor is going to need to find more money. Tax rises look inevitable, especially if the Treasury is met with other adverse forecast changes from the OBR, further reducing the headroom available,” Smith says, though this will be challenging as Labour ruled out changes to the major revenue-raisers such as income tax or VAT.

Smith says the “path of least resistance” might be to implement a further rise in employers’ National Insurance, which despite the big rise that’s coming into force in April, is still “well below” the European average as a proportion of an average salary, according to OECD data.

“Remember, too, that the tax burden – revenue as a share of GDP – is also lower in the UK than in many other European countries. That offers more obvious scope to lift taxes if needed, albeit at a potential cost to the economic growth the Treasury desperately needs.”

9.58am: Interest rate cut odds improve

Some thoughts on the UK labour market data.

The key metric that markets were looking out for was wage data, says Kathleen Brooks, market analyst at XTB, with pay growth turning out to have ticked up to 5.6% from 5.2% previously.

But Brooks says the Bank of England “may look through this data”, since it was mostly down to the ‘base effects’ from wages dropping 12 months previously in November 2023.

“Other elements of this data could also moderate the inflationary impact of this jobs report,” says Brooks, with the unemployment rate rising and December payrolls falling in the largest monthly decline since late 2020 on the back of a drop in November too.

“Thus, while wage growth remains a concern for inflation, there is obviously a softening in the labour market data, that could trigger a decline in inflation down the line.

“The pound has remained stable on the back of this data, as the market focuses on the declining jobs number, which could focus minds at the BOE about recession fears. Although wage growth is a well above the BOE’s target rate, the labour market is a lagging indicator, so if payrolls growth is in decline, weaker wages could follow.”

On the back of the labour market data, the market has this morning moved to price an increased chance of a rate cut from the BoE’s monetary policy committee, with a 91% chance of a cut now seen, while the rate futures market now expects UK interest rates to end the year at 4.06%, down from 4.09% yesterday.

“This data adds to evidence that the UK economy is rapidly weakening and will need BOE support to get out of its current malaise,” says Brooks.

Ashley Webb, UK economist at Capital Economics, agrees that while pay growth will cause the MPC “some unease”, the rate setters will “take comfort from the continued loosening in labour market activity” and he is confident of an interest rate cut at the next meeting on 6 February from 4.75% to 4.50%, “and continue to cut rates gradually thereafter”.

“Overall, some MPC members may be worried by the resurgence in regular private sector pay growth. But we suspect most of them will look at the signs that the loosening in the labour market will mean that wage growth will soon resume a downward trend.”

9.33am: Qinetiq warns of slower UK defence orders

Biggest faller in the 350 is QinetiQ Group PLC (LSE:QQ.), with the defence technology group down 12% after it cautioned that UK short-term order intake had been slower than expected due to the fiscal environment.

Guidance for organic revenue growth this year was maintained at “high single-digit” with a “stable” underlying margin and “high” cash conversion.

By 2027, Qinetiq added it still expects to generate £2.4 billion or organic revenue with a 12% margin.

Elsewhere in the defence sector, Senior PLC is down 1.7%, Chemring Group PLC down 1.5%, but others are flat or slightly higher, including giant BAE Systems PLC, which is up 0.3%.

9.10am: Pound under dollar pressure

The pound is under pressure from the US dollar this morning, having jumped yesterday afternoon on reports about President Trump’s tariff plans.

Sterling is down 0.5% versus the USD so far this morning at $1.2257, after reaching a 10-day high yesterday, but is just above flat against the euro at £0.8454.

“Financial markets showed mixed responses on Trump’s first day in office,” says market analyst Patrick Munnelly at Tickmill Group, “with traders feeling relieved by the lack of immediate broad tariffs on all trading partners yet cautious about possible future actions”.

He say the USD has “gained strength as Trump revealed plans to implement punitive tariffs of up to 25% on imports from Canada and Mexico starting February 1”.

US Treasury yields also increased, benefiting from what Mennelly calls “diminished concerns about rising inflation due to the lack of significant new tariffs.

“The move reflects the uncertainty and market volatility characteristic of Trump’s first term, where his unpredictability kept investors on edge.

“As before, many view Trump’s statements as part of his negotiation tactics. Known for portraying himself as a dealmaker, Trump appeared to signal a willingness to negotiate, particularly in his comments on TikTok and China.”

Trump issued a warning that tariffs would follow if Beijing resisted reaching an agreement, and for the European Union, he reiterated that tariffs were one tool to address the trade deficit, suggesting that increased US oil and gas exports could serve as an alternative solution.

Still, he hesitated to push for a blanket tariff policy, stating, “we’re not ready for that yet.”

Analyst Rhona O’Connell at StoneX says Trump’s inaugural speech “was perhaps more measured than some observers had been expecting, which put the dollar under short-lived pressure”.

She adds that the policies emitted from the White House so far “are not necessarily market moving” for the price of gold, with “much of the prevailing [geopolitical] environment is already in the price”.

8.42am: Lloyds in the lead on motor finance report

Lloyds is leading the FTSE after an article on the motor finance inquiry in the Financial Times that suggested the Treasury is seeking permission to intervene in the forthcoming Supreme Court case.

The FT report said HMT is looking to ensure that “any redress is proportionate to the loss actually suffered and to avoid conferring a windfall”.

Analyst Gary Greenwood at Shore Capital says in a note this morning that: “This is a significant development for the industry that could reduce the potential liability (for which estimates of £30bn+ have been suggested by a number of commentators, including Moody’s) and so losses incurred.”

He adds that while the Supreme Court previously agreed to an April review of the Court of Appeal’s adverse judgement in respect of motor finance commissions, it was “by no means certain that the original decision will be overturned” and more likely, he felt, that the Supreme Court will just seek to add clarity around the judgement and how it should be applied.

“As such, this news could have a positive impact on the share prices of those UK listed banks and lenders with potential exposure to the issue,” which indeed it is, with Lloyds up 5.1%.

8.12am: FTSE opens higher

The FTSE 100 has opened in positive mood again, defying the futures market’s predictions again this week with a rise of 28 points or 0.3% to 8,533.40 in initial trading.

Banks are leading the way, with Lloyds Banking Group PLC up 4.8%, Barclays PLC rising 1.6% and NatWest Group PLC up 1.1%.

BT Group PLC is down 1.5% to lead the fallers, followed by Primark owner AB Foods, Guinness maker Diageo and copper miner Antofagasta currently.

The mid-caps of the FTSE 250 are down 0.3%, but Abrdn PLC is in fine fettle, up 7.8% after its trading update impressed.

7.57am: Abrdn staunches flow

It also looks like an encouraging update for Abrdn PLC (LSE:ABDN), the asset manager and owner of the Interactive Investor platform, for the final quarter of last year, with relatively small but positive net inflows for both its investment and wealth arms.

Assets under management and administration expanded more slowly though, swelling just 1% to £511 billion in the quarter, for a 3% increase over the whole of 2024.

In the fourth quarter, Abrdn welcomed a £0.5 billion net inflow in its core investments division, a turnaround from the £3.5 billion outflow in the third quarter, while the adviser division saw a net outflow and there was strong growth from Interactive Investor as customer numbers climbed 8%.

Jason Windsor hailed progress in the group’s transformation, with costs cut by an annual ruyn-rate of at least £100 million, and “on track” to take this to £150 million this year.

Adjusted operating profits are expected to be in line with current market expectations.

7.46am: Marston’s toasts strong festive trading

The number of people going to a Marston’s PLC (LSE:MARS) pub on Christmas day reached a record high and sales over the festive period were strong.

Total sales were up 3.0% in the 16-week period to 18 January 2025, the pub group’s first quarter, with like-for-like sales rising 2.0%.

There was growth from both food and drink sales, while LFL sales were hit by poor weather conditions in November and January, offset by the strong festive trading.

Chief executive Justin Platt called it a “particularly strong key festive trading period” and a “solid first quarter“.

7.24am: Pay growth up for second period in a row

Commenting on today’s jobs data, ONS director of economic statistics Liz McKeown noted that pay growth picked up for a second consecutive period, which was again driven by strong increases in the private sector.

Real pay growth, which excludes the effects of inflation, also increased slightly.

“The number of employees on payroll, drawn from tax data, fell in the three months to November,” McKeown said, with 47,000 fewer in patrolled employment in December compared to November.

“Meanwhile, our household survey also reported a fall in the number of employees, with a rise in unemployment over the same period.”

However, she said ONS continues to “advise caution when interpreting short-term movements from this survey where volatility remains a challenge, especially for more detailed breakdowns.”

Numbers of job vacancies fell again, for the thirtieth consecutive period, although the total number remains slightly above its pre pandemic level, she said.

7.15am: Unemployment and wage grow mostly as expected

The FTSE 100 is expected to start slightly in the red on Tuesday after new jobs market data showed unemployment and wages rising.

London’s blue-chip index was called four points lower, having added 15 points yesterday to close at 8,520.5.

US markets were closed yesterday but following his inaugurations, returned US President Donald Trump threatened 25% tariffs within days for Mexico and Canada, among a deluge of new executive orders.

This morning, figures from the Office for National Statistics showed the UK unemployment rate rose to 4.4% in the three months to November from 4.3%, though this was forecast by economists.

Average weekly pay growth in the same period rose to 5.6% from 5.2%, though the market had expected a larger increased of 5.7%. Earnings growth excluding bonuses was also 5.6%, also up from 5.2% and was as the market expected.