The FTSE 100 is soaring thanks to the drop in sterling.
The international nature of top tier British equity market means a slide in the pound helps the constituents of the index. ‘Brenda from Bristol’ might not be too happy about it, but there is talk the government is considering calling a snap general election, and that is chipping away at the pound. It has been obvious that Prime Minister Johnson has been on a charm offensive around in the UK in recent weeks, and he might be laying the groundwork for an election. The Conservatives currently rely on 10 DUP MPs at Westminster, and no doubt Mr Johnson would like to have a majority in the commons to help deliver his strategy. The FTSE 250 is a better reflection of the UK economy, and the market is up 0.4%, which is impressive when you consider the prospect of voters going to the polls.
Marks and Spencer shares are in the red today as the well-known company is about to be relegated from the FTSE 100. The demotion is not just psychological, there is also a particle ramification too as investment products that track the FTSE 100 will need to dump their positions in the retailer. If losing the FTSE 100 brand prestige wasn’t bad enough, Goldman Sachs have reiterated their sell rating for the group, and the bank hold at price target of 170p. It is clear that UK consumers are becoming savvier and M&S are undergoing a restructuring scheme, but it seems the consumer climate is deteriorating at a quicker rate then M&S is turning itself around.
AstraZeneca shares have reached a record-high today on the back of the positive news in relation to its drug Brilinta. If the treatment is taken with aspirin by patients who have type-2 diabetes or have coronary artery disease, the probability of those patients incurring cardiovascular issues decreases by 10%. Deutsche Bank have upped their target price for the company to 7,600p from 7,200p, and that helped the share price rally too.
Unilever shares hit an all-time high today as Goldman Sachs upgraded the stock to buy from neutral, and the Wall Street titan lifted its price target form 4,850p to 5,700p.
US markets are closed for Labour Day.
GBP/USD is sharply lower on the talk of a snap election in the UK. The Brexit uncertainty is bad enough, and now there is election uncertainty. Opinion polls put The Conservative Party in the lead, but traders still remember the 2017 election when Theresa May threw away her majority. The UK manufacturing PMI report slipped to 47.4 in August, it was the lowest reading since July 2012, and it is clear the uncertainty of Brexit is hurting the sector as companies can’t plan ahead.
EUR/USD is lower on the back of the underwhelming manufacturing data from the eurozone. Spain, Italy and Germany all posted figures which show their manufacturing sectors are still in contraction territory. The French manufacturing sector is expanding slightly, but even that is at a small rate.
Gold is a touch higher despite the stronger US dollar. The metal has been prone to lose ground whenever the greenback ticks higher, but given the positive move in the metal, it suggests that traders are still nervous. Should gold’s positive run continue, it might target the $1,555 level.
WTI and Brent crude are in the red as traders are fearful for the state of the global economy, and the US-China trade dispute is a factor. China is now imposing a 5% tariffs on US oil imports, and that is going to cause pain either in the US or China or both, and that is hanging over the energy market.