Share Prices & Company Research


13 February 2023

Market Round Up

Higher than expected US job market data for January showed the economy created over half a million new jobs in the month, a staggering 330,000 more than the market expected. A large proportion of the jobs growth came from leisure and hospitality; both sectors were hit hard during the pandemic, and have since rebounded as pent-up consumer demand continues to unravel within the US, fuelling the need for firms to seek extra workers.
Contrary to popular belief that the Federal Reserve will, at any time now, start to ‘pivot’ and begin cutting interest rates, it looks as if the unexpected job data could have put a spanner in the works for optimistic economists hoping it might provide further reasoning for rate cuts and more sustainable market conditions. The figures look to have shed some light on what is happening under the surface of the economy, with unemployment levels at 53-year lows and firms continuing to hire. However, such a tight and robust labour market, despite aggressive cuts from the Fed, suggests work is still to be done by the central bank to break the market enough to encourage an economic slowdown. This more pessimistic, but arguably more realistic view, was backed by the Federal Reserve’s Jay Powell, who, following the job market data, warned the US central Bank might have to raise interest rates higher than expected as it may take a “significant period of time” to tame inflation given the stronger labour market data. Therefore, while there may be light at the end of the tunnel, the US may still have a way to go in controlling inflation and stabilising the economy.
Deputy Governor of the Bank of England for Financial Stability, Jon Cunliffe, gave a speech on Tuesday 7th February, providing updates about the plans for a Central Bank Digital Currency (CBDC) as a way to modernise the payment system and provide more efficient and secure financial services to consumers. Familiar cryptocurrency names, such as Bitcoin and Ethereum, use complex systems to secure transactions and control the creation of new units, but are not regulated by a central authority and over recent months have made headlines for a wide range of problems. However, unlike a typical cryptocurrency, the Bank of England’s digital currency will be centrally backed, controlled and issued by the bank and not private markets, ensuring that digital currency security and robustness remains at the heart of UK financial systems. The interest in digital currency follows an overall long-term decline in the use of physical cash, accelerated by the pandemic. The proposition would likely mean that the currency would sit in wallets of smartphones and other smart devices which could be used like we use notes and coins. While the idea could improve the use of monetary policy through the direct control of money in circulation, it could also, if not implemented correctly, increase cyber security risks and financial fraud within the UK financial system. Despite the currency being in early-stage development, many investors and digital currency enthusiasts are waiting in anticipation to see its progress.
At the start of January, Asda announced three proposals that formed part of its ongoing efforts to improve customer experience in its stores and drive sustainable growth for the future. Although such a proposition sounds good for the business as the proposed change results in more staff being available on shop floors for customers during opening hours, the likely cost-cutting exercise is set to hit colleagues, and especially those who work night shifts, the hardest. Around 200 night shift manager roles could be at risk of being cut, while more than 4,000 hourly paid colleagues are likely to see a change to their working patterns. Asda did explain that the number of hours available to colleagues in each store will remain the same, but a large number of stores will see a shift toward more staff working daytime shifts, leading to a reduction of night shift pay premium of at least £2.52 per hour. In-store pharmacies and post offices will also experience job cuts, as a result of weakening demand and changing customer preferences. But with pay cuts and staff layoffs within the company, it is quite possible that Asda could face strong backlash from staff and their unions, especially after the GMB union criticised Asda for falling even further behind competitors on wages after Sainsburys announced yet another pay boost. 

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.
Market Round Up
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