BUSINESS LIVE: Unemployment rate holds; Barclays profits dip; Plus500 sales jump

James’s Place (SJP) has stopped dealings in one of its property trusts as demand for commercial buildings falls and working from home increases.

The wealth manager said the suspension of the £820m fund was a ‘proactive measure to protect the interests of clients’ follow what it said were ‘a number of challenges’.

Global stocks fell to a seven-month low and US borrowing costs hit a 16- year high as tensions in the Middle East and worries about inflation wreaked havoc on financial markets.

With fears mounting that the war between Israel and terrorist group Hamas could broaden into a regional conflict, the MSCI All-World index fell to its lowest level since March when turmoil in the banking sector sent shares tumbling.

Rob Murphy, managing director at Edison Group:

‘A negative reaction has followed Barclay’s results this morning, with the news that the bank lowered its UK net interest margin guidance for 2023 and the bank looking to reduce costs further in response to the weaker margin outlook. Both the stock and the sector are concerned by the company’s revised expected net interest margin of between 3.05% and 3.10% compared to 3.15% previously.

‘Along with a slight decrease in pre-tax profits this quarter at £1.9 billion, compared to £2 billion the previous year, this is a far from ideal set of results for the bank, though profits still slightly exceeded analyst forecasts. The bank allocated £433 million for potential credit losses, reflecting concerns over rising interest rates and a slowing housing market, despite stable loan repayments.

‘Revenue saw a downturn, with a 6% drop in the corporate and investment banking sector due to reduced client activity amidst market volatility. Overall, a 2% decline in bank income was partially mitigated by strategic adjustments capitalising on higher borrowing costs in the UK.’

Barclays’s third-quarter profits fell narrowly following a slowdown in its investment banking operation, which offset strength in its credit card arm.

The banking giant’s pre-tax profits dipped to £1.9billion for the three months ending September, although this was above the £1.7billion anticipated by analysts.

Its total income fell slightly to £6.3billion, due partly to the impact of merging two divisions, as well as weaker dealmaking in its corporate and investment banking arms.

Chevron has agreed to buy rival in the second major deal in the sector this month – as the industry continues to benefit from geopolitical instability.

The US oil giant will pay £43bn for Hess, with American firms doubling down on bets that demand for fossil fuels will remain robust for years to come.

John Moore, senior investment manager at RBC Brewin Dolphin:

‘Despite beating expectations at a headline level, underneath it’s a real mixed set of results for Barclays, reflecting an increasingly challenging backdrop. Sentiment has generally soured, on the back of US regional banks struggling with lower than expected net interest margins and issues such as the well-publicised problems of Metro Bank.

‘Market conditions have also not been great for Barclays’ investment banking division, with deal activity relatively low. That said, its other banking operations are largely resilient – particularly its consumer and credit card business – and, with capital to invest, Barclays could be a beneficiary as some of its smaller peers struggle in the current environment.’

London-listed stocks are treading water this morning as gains in mining stocks tracking metal prices higher offset a drag from Barclays shares following lacklustre quarterly results.

Barclays has slumped 6.1 per cent after the third-quarter profit dipped slightly from a year ago on sliding revenues in its investment bank.

The banking index has dropped 1.5 per cent, leading declines.

Bunzl is down 4.6 per cent after the business supplies distributor trimmed its full-year revenue forecast, weighed down by lower product prices. Limiting declines, industrial metal miners added 1.7 per cent on a rise in the prices of most metals.

Thomas Pugh, economist at RSM UK:

‘The new experimental measures of the labour market from the ONS do not materially change our view of the labour market.

‘Admittedly, the unemployment rate was slightly lower at 4.2% rather than 4.3%, but employment still fell by 82,000 in the three months to August and timely measures of employment from HMRC payroll data continued to fall; and vacancies were lower across the board. As a result, this still paints a picture of a weakening labour market.

‘Employment is slightly higher under the new measure and unemployment is slightly lower, which explains why the unemployment rate is down. The new statistics do suggest the labour market is a tighter than we previously thought, but the differences are minor with employment just 0.2% higher in the three months to July than before.

‘Crucially, we doubt that the new statistics will prompt the MPC to resume its tightening cycle at its meeting next month. It is probably only a matter of time before the recent loosening of the labour market feeds through into significantly slower wage growth. That will probably be enough to satisfy the MPC that it just needs to be patient in order to see wage growth and inflation return to more normal levels, rather than resuming rate hikes.’

Hargreaves Lansdown’s Investor Confidence Index dropped 7 per cent to 71 this month, reflecting market skittishness after war boke out in the Middle East.

Emma Wall, head of investment analysis and research, Hargreaves Lansdown:

‘It is not surprising to see Investor Confidence has dropped following the devastating war in the Middle East.

‘The conflict has impacted both oil and gold prices. But retail investors were already loading up on perceived lower-risk assets, thanks to market volatility, an uncertain global economic outlook, and compelling yields.’

Marcus Brookes, chief investment officer at Quilter Investors:

‘At a time when every data source will be analysed to the nth degree by the Bank of England and investors, it is unfortunate that the ONS had to delay the publication of the employment numbers to today.

‘With low response rates to surveys and a new ‘experimental’ data series being used, today’s figures provide a slightly clouded picture of what is happening in the labour market, at a point where we are a very finely balanced point in the rate hiking cycle.

‘Looking at the ‘experimental’ data, we can see that unemployment in the UK is remaining stable, for now.

‘However, the fast rise in interest rates is beginning to bite and we are seeing companies scale back hiring and in some cases shed jobs, with the employment rate falling and unemployment rising gradually in the last three months.

‘We know that economic growth in the UK is slowing and could potentially turn negative for the fourth quarter, so today’s data provides further evidence that things may be beginning to roll over. For the Bank of England this may be just enough to continue with a pause at its next interest rate decision, having hit the brakes at its last meeting.

‘One thing for certain, however, is the UK is potentially mired in uncertainty for a period of time – just like today’s employment statistics. With the economy grinding to a halt, an election year-round the corner and geopolitical instability increasing, things could get harder before they get easier, despite inflation continuing to fall.

‘For investors, it’s times like these where you need to hold your nerve and look out for the opportunities that an unsettled market will often provide.’

Plus500 has retained its annual profit outlook after reporting a 10 per cent jump in quarter-on-quarter core profit, buoyed by its long-term customers despite lower trading volumes.

The London-listed company’s core profit for the three months to the end of September was at $80.3million, down from $73.2million in the second quarter.

Chief executive David Zruia said:

‘I am pleased to announce that Plus500 continued to perform well during the third quarter of 2023, driven by our focus on higher-value customer acquisition, geographic expansion and product innovation, despite lower volatility and trading volumes across the global financial markets.

‘The Group continues to make good progress against its strategic plans with the expansion into the US, Japan and the UAE markets.

‘Our consistent good performance is enabled, supported and progressed by our market-leading, proprietary technology which is developed and maintained entirely by our highly experienced teams. As a diversified, global business with a clear and proven strategy, Plus500 is well positioned to continue delivering strong results and attractive returns to its shareholders.’

Most British manufacturers think the country’s infrastructure has deteriorated over the past decade, a survey has found.

Consultancy RSM UK and industry body Make UK found that 68 per cent of firms believe the quality of Britain’s national infrastructure has slid in the past ten years, while 57 per cent said it has become worse at a local level.

Rail and road networks were viewed the most negatively by manufacturers, with a significant minority also saying the country’s broadband had become poorer.

Britain’s unemployment rate was unchanged at 4.2 per cent in the three months to August, fresh data from the Office for National Statistics shows.

Barclays profits dipped slightly year-on-year in the third quarter as strength in its US-based credit card business was offset by weakness in its investment banking division.

C.S. Venkatakrishnan, group chief executive, said:

‘We see further opportunities to enhance returns for shareholders through cost efficiencies and disciplined capital allocation across the Group.

‘We will provide an Investor Update at FY23 results which will include setting out our capital allocation priorities, as well as revised financial targets’