Pound on track for best week this year despite recession worries; Gatwick strikes called – business live

Expectations that interest rates will rise faster in the UK than the US in the coming months have put the pound on track for its best week of the year.

Sterling has gained around three cents this week, rising from $1.2836 to a 15-month high over $1.314 earlier today.

That’s the strongest week since November 2022, and a gain of 2.2% against the US dollar since Monday morning.

The dollar has weakened against other major currencies this week. US inflation dropped to just 3% on Wednesday, lower than most other advanced economies, leading to speculation that the US Federal Reserve may raise interest rates for the final time in the current cycle later this month.

But with UK inflation expected to remain over 8% in June, the Bank of England is forecast to raise Bank Rate to 6% by December, from 5% today.

This week’s rally has come despite concerns that the UK economy could have contracted in the second quarter of 2023, after GDP fell by 0.1% in May.

This morning’s warning of a sharp drop in the number of advertised job openings in England (see earlier post) has not, yet, caused wobbles in the market.

The FTSE 100 index of blue-chip shares is up 0.3% today, on track to gain around 2.8% this week after a strong rally on Wednesday. That would be its best week since March.

After the Guardian revealed yesterday that swinging job cuts were underway at GSK spin-off Haleon, its CEO Brian McNamara emailed all staff this afternoon about the layoffs.

He notes that the hundreds of job cuts are just “the first” of a “series of changes” (insiders expect thousands of workers to be made redundant worldwide).

McNamara wrote:

All,

Earlier this year, we announced a three-year productivity programme to transform our ways of working, reduce complexity and make us more cost conscious.

In an ever-changing world, we can’t stand still. We know we need to go beyond and constantly adapt and evolve, so we stay ahead of our competitors and continue to be a leader in consumer health.

When we created Haleon, we did what mattered most and prioritised business continuity so we could deliver for our consumers and customers. But today, we know that life at Haleon can feel complicated and slow. We need to make changes to our organisation so we can operate with speed and agility.

This week, we began to make changes to how we are organised. Colleagues who are impacted have already been informed and you’ll hear more from leaders in the coming weeks, allowing for consultation periods in some markets.

We know that change is unsettling, particularly when accompanied by media coverage which can create more anxiety and raise more questions. The changes we are proposing have not been made lightly. I do believe, however, that they are critical for our company to set us up for success for years to come. I can assure you that all changes have been well considered and will be thoughtfully implemented. They are the first of a series of changes across our business that we will make to improve how we perform and enable more growth.

Thank you.

Brian.

Aubrey Allegretti

Over in Westminster, the government is trying to avoid being drawn into the pay row between Unite and the four Gatwick service providers that has led to the strikes announced today, my colleague Aubrey Allegretti reports.

Rishi Sunak’s spokesperson told reporters it was “not for me to dictate to private companies what pay they set their staff” and added it was up to the businesses involved to decide “what is appropriate”.

They pointed out that private sector wages had risen by between 5-7% over the past year – in line with the offers made to public sector workers on Thursday.

Just in: Wall Street giant JP Morgan has set aside more funds to cover potential losses from customers defaulting on their debts as high inflation and interest rates hit consumers.

In its second-quarter financial results, just released, JP Morgan has increased its provision for credit losses to almost $2.9bn, up from $1.1bn in the second quarter of 2022.

The increase is partly due to JP Morgan having rescued regional lender First Republic earlier this year. It set aside $1.2bn to cover credit losses at First Republic – so exclude that, and the provision was $1.7bn.

JP Morgan also reported a $2.7bn “bargain purchase gain” on its takeover of First Republic at the start of May, after the second-biggest bank failure in US history.

Overall, net income rose to $14.4bn in the quarter, or 67% higher than a year ago.

CEO Jamie Dimon said the US economy continues to be resilient, but warns of several risks:

Consumers are slowly using up their cash buffers, core inflation has been stubbornly high (increasing the risk that interest rates go higher, and stay higher for longer), quantitative tightening of this scale has never occurred, fiscal deficits are large, and the war in Ukraine continues, which in addition to the huge humanitarian crisis for Ukrainians, has large potential effects on geopolitics and the global economy.

A sharp drop in the number of advertised job openings in England is raising fears that the UK will slip into recession this year.

Bloomberg are reporting that the number of jobs listed with Reed Recruitment in the April-June quarter are down 24.4% year on year, and over 26% lower than before the pandemic in 2019.

Chairman James Reed in the prospects for the UK.

“The alarm bell is sounding a lot louder now than it was, as the labor market is beginning to loosen.

This continued contraction in job postings, which have been falling since this time last year, therefore suggests that a recession may well be imminent.”

Vacancies are a good gauge of corporate confidence, and whether firms feel demand is strong enough to justify taking on more staff.

On Tuesday, the Office for National Statistics reported that vacancies fell by 85,000 on the quarter to 1,034,000 – just as the cost of living squeeze pressed more people back into the labour market.

Reed’s data is more timely, and “the picture isn’t pretty”, says Bloomberg, adding:

Vacancies on Reed’s platform, adjusted to account for seasonal fluctuations, fell by 16,127 between the first and second quarters of this year — a 10% plunge.

A decline of that scale, if mirrored in the official statistics, historically has been associated with a 0.6% contraction in GDP in the same quarter, said Dan Hanson at Bloomberg Economics. In this case, that would mean a sharp contraction in the quarter that ended on June 30.

More here: England’s Falling Job Advertisements Ring a Recession Alarm