Early Morning Call: GBP rises against USD, after lower than expected UK unemployment rate

Equity markets overview

Global equity markets ended the session higher yesterday, after concluding on a positive note last week.

In the US, the NASDAQ Composite outperformed the Dow Jones and the S&P 500.

In Japan, the Nikkei 225 ended the session 0.25% higher. Producer price index (PPI) in the country rose by 0.2% in July on a month-on-month (MoM) basis, below the 0.4% anticipated by economists. Year-on-year (YoY) factory gate prices rose by 9%, broadly in line with expectations.

In Australia, the SPDR S&P/ASX 200 Fund rose 0.65%, as Westpac consumer confidence rose for the first time in nine months. The index climbed up to 84.4 in September, from 81.2 the month before. The increase was a surprise to some economists given the soaring cost of living and the recent 50-basis point (bps) increase of the Reserve Bank of Australia's (RBA) official cash rate. The index is still down 20% from September last year.

NAB business confidence also rose to 10 for the month of August, from eight in July.

In the UK, the unemployment rate unexpectedly fell to 3.6%. Economists were anticipating it to remain at 3.8%. Sterling reacted positively to the news.

Later this morning, Germany's ZEW economic sentiment is expected to fall further to -60 in September, from -55.3 in August. And at 1.30pm, we'll get the last US inflation reading before Federal Reserve (Fed) bankers meet. Economists expect the headline figure to decelerate to 8.1% in August YoY, from 8.5% in July. However, core inflation is seen rising to 6.1% YoY, after hitting 5.9% the previous month. The dollar is little changed ahead of CPI data.

Earnings overview

Elsewhere on the equity market, look out for Ocado Group PLC. Sales in the third quarter (Q3) missed expectations, rising by 2.7% to £532 million. The number of active customers rose by 23% YoY, sending the number of average orders per week up by 10.7%. But while customers and orders have grown, customers are spending less. The average basket value is down 6% to £116.

Ocado now expects a small sales decline over the full 2022 year and close to break-even core earnings.

Fevertree Drinks PLC posted a pretax profit of £17.6m, to be compared to the £25.3m reported a year ago. Revenue rose by 14% to £160.9m.

According to Sky News, Schneider Electric SA is nearing a deal to take full control of Aveva Group PLC for about £3.5 billion. Schneider and Aveva's Boards are said to be discussing a price of more than £30 per share for the 40% Schneider doesn't own. Aveva declined to comment, while Schneider did not immediately respond to a request for comment.

In the US, Oracle Corp (All Sessions) posted an adjusted profit of $1.03 per share, compared with estimate of $1.07. Oracle added the earnings per share (EPS) would have been eight cents higher without a "significant impact" from the strong greenback. Total revenue was in line with expectations, up 17.7% to $11.45 billion. Cloud services revenue, including contribution from the newly acquired Cerner Corp, rose by 45% to $3.6 billion.

In terms of guidance, Oracle expects revenue to grow between 21% and 23% in the second quarter (Q2) on a constant currency basis.

Reuters reported yesterday afternoon that Goldman Sachs Group Inc (All Sessions) will cut jobs as early as this month, according to a source close to the matter. Goldman Sachs usually trims about 1% to 5% of its staff each year but didn't part with any staff during the two years of the pandemic.