FTSE treads water as gloomy economic data counteracts vaccine jubilation

FTSE NEWS

Both the FTSE 100 and FTSE 250 continue to tread water as gloomy economic forecasts are published and doubts cast over the Oxford University vaccine. The FTSE 100 was down 0.44% on Thursday with the index finishing at 6362.93 on the day – just 0.45% up on where it started the week. Meanwhile the FTSE 250 was down more, at -0.88% on Thursday, finishing at 19,396.34 – some 0.56% down on where it started on Monday.

• The week starts with the now-annual Cyber Monday retail event (30 November). Ironically enough Cyber Monday was originally created as an online foil to Black Friday sales, which is largely forced online itself this year thanks to various lockdowns in force in the UK and US
• On Tuesday (1 December) the OECD delivers its latest economic outlook which includes the UK, and will be an interesting alternative data set to those produced by the UK government’s own OBR forecasts
• The FTSE will announce its quarterly reshuffle on Wednesday (2 December), although it is expected that, for the first time in a while, no companies will leave or join the index
• CIPS/Markit releases its latest services PMI on Thursday (3 December) which will give insights into how the services sectors in various major economies across Europe have fared recently
• SMMT UK monthly car registrations will be published on Friday (4 December) to round the week off, with the expectation that new car sales will have cratered again thanks to a fresh lockdown in England. New car registrations often prove to be a good indicator for the overall health of the economy

SECTOR IN FOCUS

The next generation of gaming consoles have launched worldwide this month, with the Microsoft (MSFT) Xbox Series X first in line, followed quickly by the Sony (SNE) PS5. The rollout hasn’t been plain sailing though. With many households stuck at home, competition to snap up a new gaming unit has been fierce.

These latest generation consoles hail the future of gaming, but trends may be moving away from classic hardware, which has decreased in size from the days of playing Space Invaders in a cabinet-sized machine at the local arcade. Firms including Alphabet (GOOG) and Amazon (AMZN) are leading the way with cloud-based gaming technology.

There are also picks and shovels opportunities to be had in the space, with game developers such as Gfinity (GFIN) a London-based eSports developer and British games developers Frontier Developments (FDEV) and Keyword Studios (KWS) all looking to make a splash in a competitive market which has increased in value exponentially in recent times and shows no signs of slowing.

ECONOMIC UPDATE

As previewed here last week, Rishi Sunak announced his spending review for 2020, with a raft of serious economic data to boot.

The Office for Budget Responsibility (OBR) reported via the Chancellor that GDP in 2020 would fall by 11.3% - the worst annual figure for over 300 years of British history. However, the OBR predicted that the economy would bounce back next year by 5.5%, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years. The economy will only reach pre-coronavirus levels in Q4 of 2022, while it will be 3% smaller in 2025 than it would have been without the crisis.

Debt to GDP ratio will reach 97.5% in 2025/26 while unemployment will peak at 7.5% - or 2.6 million people in Q2 of next year. It’s important to remember that these numbers are just forecasts for now, so it will take time for us to know the true extent of the damage done.

FUND WATCH

Boris Johnson’s government has been trumpeting its commitment to a green revolution in recent weeks, and with US President-elect Joe Biden singing from the same hymn sheet, now seems like a good time to take advantage of the burgeoning ethical trend. Investors looking to up their green exposure should consider a fund such as Aegon Ethical Equity B (GB0007450884). The fund looks to invest in UK companies that meet its tough ethical criteria. Aegon charges 0.78% to hold the fund, not bad for a specialist scope and it has returned over 18% in five years.

IPO ALERT

There is a burst of retail-investor-available IPOs in the offing this week, with four proposed stock market listings from Downing Renewables & Infrastructure Trust, The Mailbox REIT, JPMorgan Global Care Real Assets and Greensleeves Homes Trust 5% bond to choose from. The first three are all investment fund vehicles looking at a variety of sectors including infrastructure and real estate, while the Greensleeves Homes Trust 5% charity retail bond is being launched to help the firm invest for growth in its care homes portfolio.

For more information on this IPO and three others that are currently open for subscriptions, please use the following link: eqi.co.uk/info/ipos/open

COMPANY ANNOUNCEMENTS

30 November – Ubiquitous video conferencing app Zoom (ZM) will report its Q3 results on Monday, after essentially becoming the poster child of the work from home movement during the pandemic. Investors will be interested to see how it has managed to build upon its extraordinary rise to prominence this year and whether this is feeding through to the bottom line. The third quarter witnessed some movement back to office working, but by no means a wholesale return, so analysts will be watching to see if the firm can embed itself as a modern workplace tool beyond the coronavirus pandemic.

1 December – Sticking with the theme of working remotely, Salesforce (CRM) will be reporting its Q3 results on Tuesday. The firm’s share price recently took something of a hit as it announced it was in talks to buy workplace communications app Slack Technologies (WORK). Slack’s share price conversely was up by nearly 38% on the news as investors rushed to take advantage. Salesforce is looking to expand beyond its business utility software portfolio and take a stake in workplace communications, seen as a central pillar of modern home working trends. Analysts expect the acquisition to lead to a showdown with Microsoft for domination of the workplace software market.