Weaker pounds boosts FTSE 100

FTSE NEWS

The FTSE 100 climbed for the fourth day in a row with a weaker pound boosting large dollar-earning consumer stocks such as Diageo plc (DGE) and Unilever plc (ULVR). The index finished the day 0.33% higher at 7,310.37.

• On Monday (29 November) the Bank of England (BoE) releases borrowing data for firms and individuals, which acts as a good pulse check for the banking industry.
• The Confederation of British Industry publishes data revealing the optimism and activity levels of the UK’s services sector on Tuesday (30 November).
• FTSE Russell will reveal which firms are to enter and leave the FTSE 100 as part of its quarterly reshuffle (see Sector in Focus) after markets close on Wednesday (1 December).
• On Thursday (2 December) the BoE’s decision maker survey will reveal business optimism levels and new trends emerging in the UK economy.
• The Office for National Statistics publishes data on UK company profitability for the second quarter on Friday (3 December).

SECTOR IN FOCUS

It’s crunch-time for cyber-defence firm Darktrace plc (DARK) and chemical company Johnson Matthey plc (JMAT), which are both at risk of losing their place in the blue-chip FTSE 100 next week.

FTSE Russell, which manages the FTSE 100 index, is gearing up for its latest quarterly reshuffle, which will be revealed after markets close on Wednesday (1 December).

The reshuffle decides which firms join and which leave the FTSE 100 based on their valuation.

DARK and JMAT are at risk of slipping into the FTSE 250 because both have seen their share prices retreat in recent months.

DARK’s market valuation trebled in the five months after its April IPO. However, since then a number of broker downgrades and private equity share sales have weighed heavily on its shares, which are more than 50% off their peak.

JMAT’s shares have struggled since the firm issued a profit warning earlier this month. Its share price is around 21% lower than it was a month ago.

DARK and JMAT look likely to be replaced by animal drug maker Dechra Pharmaceuticals plc (DPH) and electrical product distributor Electrocomponents plc (ECM), whose shares have risen by roughly 22.4% and 18.2%, respectively, in the past six months.

ECONOMIC UPDATE

Experts believe a December rate rise could be on the cards after British firms suffered record cost pressures in November.

Firms were hit with sharp rises in the cost of materials, wages and fuel this month, new research from IHS Markit reveals.

The rapid increase in production costs also forced UK manufacturers to hike the price of their products, which in turn hit the pockets of households.

The Bank of England shocked markets last month by keeping rates on hold. However, experts say rapidly rising cost pressures could force it into action.

IHS Markit chief Chris Williamson says: “A combination of sustained buoyant business growth, further job market gains and record inflationary pressures gives a green light for interest rates to rise in December.”

FUND WATCH

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ETF WATCH

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COMPANY ANNOUNCEMENTS

30 November – easyJet plc (EZJ) shares have been on a steady descent for most of November, with the pace quickening following news that Austria and the Netherlands had introduced fresh lockdowns. Airlines have been one of the worst-hit sectors by the pandemic, with passenger numbers still down significantly compared to pre-Covid times. easyJet shareholders will be hoping for signs of optimism when the budget airline releases its full-year results on Tuesday (30 November).

30 November – Fintech firm Wise plc (WISE) has posted strong growth figures since becoming a public company and yet its share price is down more than 22% since its July IPO. While the payments company has posted strong revenue and customer growth in recent months, investors seem spooked by its recent decision to cut prices, meaning it now charges less on money transfers. Wise reports its interim results on Tuesday (30 November).