Market movers: UK unemployment, Ted Baker, BHP, Darktrace

Victoria Scholar, interactive investor's head of investment, runs through today's big stories and how financial markets are reacting. 

European markets have opened on a positive note, lifted by upbeat sentiment on Wall Street with the Dow, S&P 500 and the Nasdaq all closing in the green. In Europe, travel and leisure is underperforming, while basic resources and autos are leading the charge. The FTSE 100 is pushing higher, trading above support at 7,500 with miners such as Rio Tinto (LSE:RIO), Glencore (LSE:GLEN) and Anglo American (LSE:AAL) at the top of the leader board after strong results from BHP (LSE:BHP).

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UK unemployment

The UK unemployment rate in the three months to June hit 3.8%, unchanged versus the previous reading and in line with expectations. However, the number of people in employment grew by 160,000 between April and June, falling short of analysts’ forecasts for 256,000. The UK employment rate for those aged 16-64 decreased by 0.1 percentage point on the quarter to 75.5% and remain below pre-pandemic levels. Meanwhile, average weekly earnings jumped by 5.1%, in the three months to June, ahead of expectations for a rise of 4.5% but down versus the previous period.

While the headline unemployment rate met expectations, there are signs of a cooling economy with slower-than-expected employment growth, a small increase in the unemployment rate and a small decrease in the employment rate. Plus, after almost two years of growing job vacancies, the number fell to 1.274 million for the first time since June-August 2020, suggesting that businesses now have less resource to hire additional staff. The report also pointed to declining wage increases but still topping analysts’ forecasts, potentially adding to the UK’s inflationary conundrum, although real wages still dropped at the fastest pace on record.

Ted Baker

Authentic Brands has reached a deal to acquire Ted Baker (LSE:TED) for around $254 million (£211 million), valuing the company at approximately £211 million. Ted Baker shareholders will be entitled to receive 110 pence in cash for each share.

The purchase with add to Authentic Brands’ global portfolio which includes Juicy Couture, Lucky Brands, Prince and Reebok. Ted Baker has been very open about its ambitions for a sale since April with today’s update a welcome development for investors, representing a more than 18% premium to the previous close price. The question now is whether any counter bids will come to the table or whether Ted Baker will stick with this generous offer. Shares in Ted Baker have surged more than 17% this morning, trading just shy of the Authentic Brands’ offer price, suggesting that the market believes, the deal will go through. The stock has had a rough ride before today’s bounce, shedding more than 40% since the peak in April.

BHP

BHP (LSE:BHP) annual profit jumped 26% to $21.3 billion, the highest in 11 years. The company also reported a record dividend, lifting the stock by more than 5% and the broader mining sector with it. Meanwhile, BHP continues to look for acquisitions, having offered to buy Oz Minerals Ltd (ASX:OZL) earlier this month.

BHP has been a key beneficiary of the surge in commodity prices this year. Coal hit record highs this year following Russia’s invasion of Ukraine. It looks like BHP is keen to deploy its $4 billion of cash as it seeks out effective M&A opportunities in the sector. Another higher offer for OZ Minerals, after its first bid was rejected, looks as though it could be on the cards.

Looking ahead, the environment looks increasingly challenging with copper prices down 25% since the March high and with concerns about rising global interest rates, labour constraints and an economic slowdown in China.

Darktrace

Shares in Darktrace (LSE:DARK) surged more than 17% at the European open after US tech private equity group Thoma Bravo considered a bid to take the London-listed firm private. The bidder has until 12 September to make a former offer or walk away.

It has been a difficult year for M&A and IPO activity, given the volatile stock market landscape. Perhaps a privatisation of Darktrace is the best way to avoid the uncertainty of this year’s market gyrations, with the potential to float the company once again in the coming years once confidence is restored in equities. 

Last month, Darktrace shares jumped after it lifted its full-year profit margin forecast and said it anticipates revenue to jump nearly 50% versus last year. Darktrace has benefited from a surge in demand for cybersecurity this year amid the war in Ukraine and increased cyber threats. The company has managed to secure a number of major corporate clients including AB inBev, which has boosted the top and bottom lines. However, this positivity hasn’t been reflected in its share price with the stock down significantly since last October after a downbeat analyst note.