FTSE swings as pound hits 12-month high against the dollar

FTSE NEWS

Both FTSE 100 and 250 finished Thursday up as renewed hopes of a Brexit deal sent the pound soaring against the US dollar – reaching a high of $1.349 late on. The FTSE 100 index of companies finished the day at 6,490.27 – up a modest 0.42% while the FTSE 250 ended Thursday on 20,132.44, up a stronger 1.28%. While the FTSE 100 traded up from around 10am, the FTSE 250 swung into the green late on in the day.

• Halifax reports its latest house price index to kick the week off on Monday (7 December)
• On Tuesday (8 December) the EU reveals its latest growth figures for Q3, which will be key for assessing how fast Euro-area economies are recovering from the initial coronavirus downturn
• KPMG and REC publish their latest report on the health of the UK jobs market on Wednesday (9 December), a useful indicator of the strength of companies in the UK economy right now
• Following the EU GDP update is the ECB’s latest rates meeting on Thursday (10 December). While rates are unlikely to move for now, there are often fresh stimulus announcements to keep an eye on
• The EU Council Summit closes on Friday (11 December), and with it the last realistic deadline for the UK and EU to achieve a Brexit deal

SECTOR IN FOCUS

As we enter the final month of 2020, all eyes are on the retail sector right now. November and December are arguably the most important months for retailers as Black Friday and Cyber Monday give way to Christmas shopping.

It is a hellish climate out there for high street shops with several firms already going out of business. But some persevere despite the tough conditions. Luxury clothing retailer Ted Baker (TED) is reporting its interims on Monday. The firm’s share price is currently firmly in the value category as it trades at a quarter of where it was at the beginning of January. However, the firm has announced interesting news recently, such as further automation of its Derby warehouse.

Elsewhere, Frasers Group (FRAS), Mike Ashley’s retail empire, is reporting its interims on Friday. The firm is one of the few high street success stories and has been on something of an acquisition spree of late. The company swooped, albeit unsuccessfully so far, for parts of the now-collapsed Arcadia group.

Finally, with supermarkets making headlines as they return business rate rebates to the government, Ocado (OCDO) works away quietly behind the scenes. The firm’s transition from Waitrose goods to M&S has been seen as a modest success, although the share price has taken a hit thanks to the vaccine news which may see people return to pre-coronavirus shopping habits sooner than previously thought. Ocado rode high during the onset of the crisis as it became an essential service for people stuck at home during lockdown. Investors will want to keep an eye on its trading statement, out on 10 December.

ECONOMIC UPDATE

Europe is a big one on the agenda with GDP figures, a bank rate decision and what will essentially be the climax of the Brexit trade talks.

While the GDP figures and rate decision are, to quote Donald Rumsfeld, relatively ‘known-unknowns’, Brexit is still an issue that markets can’t predict the outcome of – an ‘unknown-unknown’. While much of the price of shares that stand to be affected are factored in, depending on the outcome, certain sectors could bounce on the back of good news.

At this late stage it looks like a deal may only arrive at the last second. The EU is holding its council summit on Thursday and Friday – this is the last scheduled meeting of EU leaders that could conceivably ratify a deal agreed by the UK and EU lead negotiator Michel Barnier. Beyond this, a no deal Brexit would become all but inevitable.

FUND WATCH

With Europe on the mind, investors might want to look at good EU-focused funds to capitalise on the ongoing recovery of markets from March lows. Fidelity European W Acc (GB00BFRT3504) is a fund very well-positioned to benefit from this recovery. As an actively managed fund the manager has a lot of freedom to deviate from the index while investing in EU-domiciled firms. Fidelity charges 0.92% to invest. The fund has grown by 77% in five years.

COMPANY ANNOUNCEMENTS

8 December – On Tuesday construction equipment rental firm Ashtead Group (AHT) reports its Q2 results. The group’s share price was hit hard by the coronavirus crisis as a cloud was cast over the construction companies that likely rented from the firm. The share price recovered quickly, however, and is currently trading around a year-to-date high thanks to positive news on how much construction work using its machinery has been possible. Investors will be watching out for how it got on in Q2 when economic shutdowns were at their height, but its outlook will be of note too.

10 December – Packaging firm DS Smith (SMDS) reports its interim results on Thursday, with investors watching to see if it expects to do well over the festive period. The firm’s share price has had a helter skelter 2020 and is still well below where it started the year. While this year the outlook has been uncertain and this has been reflected in the share price, with online commerce only set to grow in the next few years, DS Smith is well placed to take advantage of this trend.