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Rio Tinto, THG and unemployment numbers up for scrutiny on Tuesday

Last updated: 05:30 18 Jan 2022 GMT, First published: 11:50 17 Jan 2022 GMT

Rio Tinto PLC -

Big mining shares have perked up since November on the back of huge dividend payments and a rally in iron ore and copper prices and Rio Tinto PLC is the first of the FTSE 100 miners to provide an update in the new year.

This will come ahead of peers BHP and Antofagasta on Wednesday, Anglo American next week and Glencore early next month, with analysts suggesting there is still scope for more cash to be handed but a cautious tone to dominate for now.

As these are production updates, they don’t normally contain much financial information but cost pressures in terms of power, raw materials, labour and freight are a concern across the industry.

Some in the sector have flagged inflation of 10% for the past year and if more miners mention them this time as well that will be a big red flag, said analysts at JPMorgan in their mining sector preview.

Consensus forecasts for Rio are for iron ore output in 2021 to be down by about 4% with a forecast expected for a rise by the same amount in 2022.

THG life

Ahead of its trading update THG PLC (LSE:THG), better known as Hut Group, has been in the news for the wrong reasons, with the latest being that management provided information to the UK financial watchdog to back up its argument that hedge funds colluded in an "aggressive short attack" on its shares last year.

Matthew Moulding, who is both chairman and chief executive, was reported to be particularly suspicious of trading after the group's capital markets day on October 12, when its price plunged by more than a third.

Anecdotal evidence and broker commentary at the time suggested Moulding failed to reassure investors at the event, didn’t address concerns and left analysts with more questions than answers, with giant Japanese investor SoftBank days later revealed to have backed away from exercising an early option to buy a 20% stake in THG’s Ingenuity arm and Blackrock also reported to have offloaded half its shares.

But analyst Wayne Brown at broker Liberum says THG’s fundamentals from the time of the IPO “have not changed, so the extent of the share price decline we saw last year is excessive”.

He argued the company’s M&A strategy is on track, the Softbank deal provides not only a valuation benchmark but “should deliver tangible revenues in due course” and the search for an independent chair should “address nearly all” governance concerns.

Organic growth topped 20% in the first nine months of last year, the analyst also noted, with THG Beauty achieving 56% reported growth and THG Nutrition expanding over 21%, while the consensus forecasts for the Ingenuity Commerce arm is for £50mln for the full year, rising to £90mlm for 2022.

UK jobs update

Along with the morning's company news, there will be a UK jobs report from the Office for National Statistics, which last month showed unemployment fell to a 15-month low of 4.2% in October, with the number of people on payrolls rising by over 257k in November, and the number of vacancies rising to 1.22mln.

On Tuesday the headline ILO unemployment number for November is expected to come in at 4.2%, with average weekly earnings falling back to 4.3% from 6% in October.

READ: Higher living costs spell end to ‘great resignation’ with wage growth set to slow

The overall trend looks set to continue, said Michael Hewson at CMC Markets, who sees it as “unlikely” that earnings will fall much further given the number of vacancies available.

“We’ve already seen in recent weeks the likes of Next and Sainsbury’s announce wage rises in line with current inflation levels, and they are unlikely to be alone as their rivals look to match them in order to keep staff.”

With the UK labour market having withstood the end of the furlough scheme last September pretty well, economists at ING said, what matters most for the Bank of England are wages.

“The jury’s still out on where [wages] are headed. As various data distortions fade, it looks like wage growth is roughly where it was pre-pandemic, which is a key part of the Bank’s hiking rationale. There’s also some evidence that pay rises have been larger in more short-staffed sectors, like IT and transport. Whether we’re headed for a wage-price spiral though, we’re less convinced.”

Decline expected for 888

888 Holdings PLC (LSE:888) is set to report a trading update with investors waiting to see the impact Dutch regulations will have had over the final quarter of 2021.

The Netherlands gambling authority introduced a new policy which forced the company to cease trading in the country at least until the second half of 2022, with the rule forecast to put a US$10mln dent in 2022 underlying earnings (EBITDA).

Final-quarter revenues are expected have fallen year-on-year against tough comparisons, even though the group recently added Virginia to its roster of sports betting licenses in the US.

“The share price has been weak since shortly after the announcement of the William Hill acquisition, and we believe it is likely to remain so until clarity emerges,” said broker Peel Hunt,

888 agree to buy William Hill’s non-US business from Caesars Entertainment, and lately said it hopes the deal can be completed within the current quarter.  

Significant announcements scheduled on Tuesday 18 January

Finals: Pressure Technologies PLC, Watkin Jones PLC

Interims: Accrol Group Holdings PLC, Kromek Group PLC 

Trading announcements: 888 Holdings PLC, Boot Henry PLC, Elementis plc, Hotel Chocolat PLC, Integrafin Holdings PLC, Marshalls, Petra Diamonds, Rio Tinto PLC, THG PLC

AGMs: C4X Discovery Holdings PLC, Smart & Co PLC, Tracsis PLC

Economic data: Unemployment (UK)

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