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FTSE 100 shines thanks to softer sterling

FTSE 100 shines thanks to softer sterling

Equity markets are on track to have a mixed finish as the European Central Bank’s (ECB) extra stimulus plans broadly met economists’ forecasts. 

The pandemic emergency purchase plan (PEPP) was boosted by €500 billion and the time scale of the scheme was extended until March 2022 – these measures were not exactly a surprise. In June, the PEPP was upped by €600 billion, so today’s extra stimulus represents a step down, and that could suggest that the next round will be smaller again – should there be a next round. Christine Lagarde, the head of the ECB, now predicts that eurozone GDP will be -7.3% in 2020, while the forecast in September was -8%. The 2021 GDP forecast was downgraded from 5% to 3.9%. In terms of inflation, the 2020 CPI rate is expected to be 0.2%, down from 0.3% and the inflation rate is expected to be negative into early 2021. The ECB doesn’t have an unlimited arsenal to tackle the crisis and it appears they are throwing just enough money at the problem to keep the markets at bay. A rapid fiscal response is required too but that process is slow.

The FTSE 100 is outperforming the FTSE 250 and the major eurozone indices but that is because of the weaker pound – which is connected to the persistent uncertainty surrounding the UK-EU trade situation.              

Inchcape is a car dealership group, and the business was impacted by the health emergency but today it issued a positive update. The group predicts that full year profit before tax will be materially ahead of the £108 million consensus estimate. In addition to that, the cash balance is expected to be substantially ahead of last year’s metric, and the firm is contemplating the resumption of dividends, depending on how the group performs. The hope that payments will be resumed has piqued traders’ interest.

Frasers Group has been in the news a lot recently as the firm is interested in acquiring assets from Arcadia and it is in talks with Debenhams too. Frasers is controlled by Mike Ashley, and he has form for snapping up distressed high street assets, such as House of Fraser and Evans Cycles. This morning, the retail empire revealed a 17.6% rise in pre-tax profit to just over £106 million. The company announced that online trade has been strong and it raised the lower end of its outlook. Frasers now anticipates that underlying EBITDA will increase by between 20% and 30% next year. It is worth noting that not many retailers are optimistic in their outlook for next year.

Ocado, the online grocery, saw a surge in demand in 2020 as a result of the pandemic. The company delivered an upbeat fourth quarter statement this morning and it raised its full year profit guidance again. Ocado now believes that full year EBITDA will be more than £70 million. Last month, the guidance was raised to more than £60 million, from a previous forecast of £40 million. In a bid to keep up with future expected demand, three new warehouses will be opened next year and that will increase capacity by 40%. The stock is lower despite the bullish update, but it is possible that demand for online groceries might wane in 2021 and beyond, as a vaccine for the coronavirus should bring about a return to normal life at some point.

HelloFresh is another company that witnessed a huge rise in demand on the back of the health crisis. The company packages up fresh ingredients and easy to follow recipes and it delivers the boxes to customers’ homes. It has proved to be popular with the professional types who have been working from home a lot in 2020. The German-listed group lifted its guidance again.  

DS Smith shares have been lifted by the news the company will resume paying dividends with a 4p pay-out. The move makes the stock more attractive to income-seeking investors but the packing company posted a 9.3% fall in first half revenue and pre-tax profit dropped by 54%, so the dividend move doesn’t add up.

Marston’s shares have been hurt by the full year statutory loss of nearly £398 million but it had an impairment charge of £305 million.   


Stocks are a little mixed as the Dow Jones is a touch lower but it is off the lows of the session, while the NASDAQ 100 is now showing a tiny gain. The latest jobs data was disappointing as the jobless claims rate jumped from 716,000 to 853,000 – its highest in eight weeks. The continuing claims reading rose from 5.52 million to 5.75 million. When you take into the disappointing the headline US non-farm payrolls report last week, there is an argument to be made that the US recovery is running out of steam. Speaking of the economic rebound, policy makers are still arguing over the Covid-19 stimulus package. Steven Mnuchin, the Treasury Secretary, said there were making a lot of progress with respect to the negotiations.    

Tesla shares up slightly even though a number of equity analysts have questioned its colossal valuation. JPMorgan issued an underweight rating for the stock and their price target is $90, while the stock is currently trading at roughly $620. A number of banks and stock broking firms hold price targets that are in the region of $300. Which is clearly nowhere near the current level. As we have seen in recent months, the stock enjoyed a mammoth bullish run even if some on Wall Street think it is overvalued.          

Airbnb is in focus as the stock is anticipated to begin trading today. The leisure sector has been hammered because of the pandemic and some people questioned the desire for the company to float on the stock market in the current climate but there are hopes that vaccines will be widely disrupted in the coming months, so that should help the sector. Tech led companies have inserted themselves into traditional sectors have performed well in recent years. There is an argument that the company has an edge over major hotel chains that have burnt through cash this year.

DoorDash had their stock market debut yesterday and it had a volatile session.

Best Buy shares are a little lower after Goldman Sachs downgraded the stock to sell from neutral. The bank confirmed that the ratings change was more to do with the stock valuation rather than the actual business.        


The US dollar index is in the red and it came under extra pressure following the release of the US jobs data. EUR/USD is higher on the session thanks to the softer dollar. The ECB will not be happy with the relative strength of the single currency, seeing as the region has been setback by lockdowns.

GBP/USD is in the firing line again because of the ongoing uncertainty with respect to the UK-EU trade situation. Sunday, is the new deadline for a deal to be achieved but time is running out so there is less room to kick the can down the road.       


Brent crude is trading above $50, for the first time since March, and WTI has also hit a fresh nine month high. The energy market is enjoying a very bullish run today as hopes for mass vaccinations and supply concerns from Iraq are propping up the price. Two oil fields in Iraq have been impacted by what is believed to a terrorist attack, so that had added to the bullish move.

Gold is a little in the red despite the softer US dollar. The metal traded in a small range today. Industrial metals like copper, platinum and palladium are all showing strong gains.      

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