Battening Down the Hatches
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The London Rush
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Morning, I'm Louise Moon
Lloyds is preparing for all eventualities, having set aside £35 million to deal with the potential impact from US tariffs.
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Sterling weakens as soft labor market data supports UK rate cut bets
The British pound fell against the dollar and the euro on Tuesday as soft UK labor market data bolstered investors' bets for more rate cuts this year from the Bank of England. Pay growth slowed sharply while the unemployment rate rose to its highest level in nearly four years in the three months to April, Britain's Office for National Statistics said. The downturn appeared to gather pace in May as more timely tax office data showed a slump of 109,000 in the number of employees on company payrolls, the biggest decline since May 2020 at the height of the Covid-19 pandemic. "The latest official read on UK labor market activity provided broad confirmation that conditions were easing," said Nikesh Sawjani, senior UK economist at Lloyds. "Should the labor market continue to cool further in the coming months and quarters, consistent with the indication provided by a range of surveys, we believe that should give the Bank of England confidence to deliver further cuts in the Bank Rate over the next year or so." The pound was last down 0.5% against the dollar at $1.3488, having earlier dropped to its lowest since June 2 at $1.3458. The Bank of England meets next week and although it is expected to stand pat on rates, money market traders added to bets for additional rate cuts this year. Short-term rate futures priced in about 48 basis points of cuts by the end of the year, implying about two quarter-point cuts, compared with 39 bps before the data. "This (labor market data) puts a question mark on the hawkish bias that we've seen from the Bank of England," said Kirstine Kundby-Nielsen, FX analyst at Danske Bank. "Markets are very firm that we won't get a cut next week, and I think that's definitely the case, but it can open the door when we get to the August meeting." The pound was down about 0.4% at 84.6 pence per euro, its weakest level against the single currency since May 9.
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2 days ago
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Feeling The Squeeze
By Morning, I'm Louise Moon UK employment has plunged, wage growth slowed and people are spending less.
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3 days ago
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If I could only save one UK share in my SIPP, here's what it would be
No investor should gamble their future on just one UK share. That would be an almighty risk. My self-invested personal pension (SIPP) holds around 20 different stocks. While I would happily junk two or three of them (I'm looking at you Aston Martin, Glencore and Ocado Group), binning the rest would be painful. But let's say somebody put a gun to my head. Which would be the sole survivor? There are some stocks that investors might buy if they knew in advance they could only hold one. Utility stock National Grid is seen as a solid dividend growth play, but I don't actually hold it. Consumer goods giant Unilever has both defensive merits. I did hold that, but recently banked a profit as I was underwhelmed by its growth potential. So what about the stocks I do hold? Which would I save? I'd hate to sell private equity specialist 3i Group, which has doubled my money in 18 months. It's had a great run though, and looks a little bit too expensive, so it would have to go. I'd also hate to offload insurer Phoenix Group Holdings, whose shares are up 30% in a year, and still yield a bumper 8.3%. It's a happy day when the Phoenix dividend hits my SIPP, and the same applies for rival FTSE 100 wealth manager M&G. Another super-high yielder. Yet both would have to go. If those dividends are cut at any time, the investment case could collapse. I don't think they will, but the stakes are high here. I'd also offload my SIPP growth stock stars Rolls-Royce Holdings and BAE Systems. They've done brilliantly, but remember, I can only hold one stock here. I'd bank my profits on both to make way for last stock standing, Lloyds Banking Group (LSE: LLOY). I bought the high street bank on three occasions in 2023, and it's been the surprise over-achiever in my portfolio. I hoped for modest share price growth. Instead, Lloyd shares are up 40% in a year (and 72% since I bought them). Once my reinvested dividends are added, my total return is almost 100% in 18 months. Lloyds is now almost entirely focused on the UK domestic market, which makes it a play on our economic fortunes. There are good sides to that – but also bad ones. The UK economy isn't exactly thriving right now, while inflation remains a menace. Mortgage rates have actually been rising again in recent weeks, which could further squeeze house prices, and slow demand. Lloyds has also had to set aside hefty sums for potential debt impairments, and could be on the hook for a billion or two, following the motor finance mis-selling scandal. But despite its strong run, the Lloyds price doesn't look over valued, with a price-to-earnings ratio of just over 12. The forecast yield of 4.4% should keep the income flowing. Especially since it's covered 2.1 times by earnings. The bank is also running a hefty £1.7bn share buyback. Lloyd will have its ups and downs and like I said, I would be crazy to go all in on just one stock. But if I had to do it, this would be the one. The post If I could only save one UK share in my SIPP, here's what it would be appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Harvey Jones has positions in 3i Group Plc, BAE Systems, Lloyds Banking Group Plc, M&g Plc, Phoenix Group Plc, and Rolls-Royce Plc. The Motley Fool UK has recommended BAE Systems, Lloyds Banking Group Plc, M&g Plc, National Grid Plc, Rolls-Royce Plc, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
