FTSE 100 Trending Lower Amid Weakening Job Market In The UK

  • October 16, 2019 03:23 PM BST
  • Kunal Sawhney
    CEO Kunal Sawhney
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    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

FTSE 100 Trending Lower Amid Weakening Job Market In The UK

At the time of writing (as on October 16, before the market close at 09:21 AM GMT), the broader indices of the London Stock Exchange were trending lower, with FTSE 100 index quoting slightly lower against the previous trading level at 7,211.14, despite British pound having pared some gains it accumulated during the last trading session. The mid-cap index of 250 companies, the FTSE 250, pared majority of the gains it registered in the previous trading session and was trading 184.55 or 0.91% lower at 20,0120.40 while the FTSE 350 index fell off 10.67 points or 0.26% to 4,027.82.

However, at the current trading level, the broader index is still quoting below its near-term support level of 50-day Simple Moving Average Price, and the 14-day Relative Strength Index (RSI) of the index is trending down and moving towards the oversold zone.

Meanwhile, the UK's labour market reported signs of slowdown with the number of people employed declining by 56,000 to 32.69 million and number of people out of job surging by 22,000 to 1.31 million in the three months to August 2019. Labour market data, which was reported by Office for National Statistics, reveals that the UK's economy is weakening amidst growing uncertainties over the potential nature of Brexit.

During three months to August 2019, the employment rate for men remained flat at 80.2%. However, the same for women contracted to 71.6%. The total number of individuals working part-time slumped by 129,000 in the quarter, one of the biggest declines since the three months to August 2011.

The labour market data revealed by ONS for the three months to August 2019 reflects that job market is showing signs of a slowdown. However, on a Y-o-Y basis, the level of employment surged by 282,000 and on the other side, the level of unemployment and economic inactivity plummeted by 49,000 and 63,000, respectively. However, average weekly earnings continued to grow despite the decline in the number of vacancies.

As per the external surveys conducted, lack of clarity on the economic and political fronts is weighing on corporations’ hiring plans. The latest report of KPMG and REC over UK’s job market reported that labour market conditions remained challenging during August 2019. Permanent jobs declined at the fastest pace in over three years as many employers decided to defer hiring amidst increasing political and economic uncertainties.

Since the beginning of 2012, the total requirement for workforce increased at the slowest rate, with both permanent and temporary demand rising at a weaker pace. An uncertain outlook also dragged down hiring numbers, as many people were restrained from seeking out new opportunities in the present situation. However, the latest drop in staff supply took place at the slowest pace in over 32 months to August 2019. Starting pay for permanent and temporary workers, consequently, increased at weaker rates.

August 2019 data marked the smallest increase in total job openings since January 2012. Growth of demand slowed for both permanent and temporary workers, with the former increasing at the weakest pace in seven years and the latter at the slowest rate in over a decade.

The corporate houses are seeking out clarity on Brexit in order to re-establish confidence in their businesses which will facilitate a more informed decision-making on their long-term staffing plans.

Withdrawal Talks made progress but left PM Johnson’s allies uneasy.

The UK and European Union’s Brexit negotiators will resume efforts to hammer out a Withdrawal agreement on Wednesday (October 16) after a late night of talks in Brussels that the Britain described as constructive. But even if PM Johnson is able to negotiate a Withdrawal agreement, he needs time for a summit starting on Thursday; right now, he is facing a humongous challenge in convincing the British Parliamentarians to vote for it. The Pound, which rallied on Tuesday (October 15), was trading lower on Wednesday (October 16).

Post three years of rigorous negotiations between the UK and the EU, which cost PM Johnson’s predecessor Theresa May her job, the British Prime Minister has vowed to take Britain out of the EU bloc by the scheduled deadline of 31 October 2019, even if it means leaving without any formal deal which would soften its impact. A no-deal exit of the UK would risk disruption of London’s trade, financial services and food supplies, as well as public services, according to the UK government’s estimates.

To win the House of Commons, the Prime Minister is likely to need the support from Democratic Unionist Party of Ireland, a small group of 10 parliamentarians from Northern Ireland who are supporting his minority Conservative Party administration. He will also need staunch Brexit supporters on his own side to back the plan for a deal, something they have never done before.

European Union lawmakers commented that the UK has made several material concessions in the past couple of days to get a Brexit deal done, including on the sensitive issue of the Irish backstop. Both UK and the EU want to assure there are no customs checks on the Northern Ireland border on the flow of goods as they cross the frontier between the Irish Republic and Northern Ireland.

Sterling Pound pares some of the gains it accumulated yesterday (15th October 2019).

At the time of writing (before the market close, at 11:14 AM GMT), the British pound was trading lower against the greenback at 1.2748, down 0.32% against the Tuesday’s (15th October) closing level.

Since October 10, the Pound Sterling reported a sharp reversal of trend against the US Dollar on the daily price chart. The GBP has been trending higher with the Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) minus the 26-day EMA turning out to be positive. Also, at the current trading level, the Pound against the US Dollar is trading well above its short-term crucial support level of 200-day Simple Moving Average. The 14-day day Relative Strength Index is trending towards the overbought zone and witnessed a sharp reversal since 09 October trading session.



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