Investments

Market Round-up: 14-18 December

Andrew Triggs

 

This week

After years, months and weeks of negotiations, it seems there is light at the end of the tunnel for Brexit talks as the week saw both sides return to the table in one last attempt to salvage a deal.

Indeed, Home Secretary, Priti Patel, furthered the analogy in what has imaginably been something of a boring process, especially for investors, commenting: “We are not walking away, we will continue to negotiate to get this free-trade agreement…We are in that tunnel of negotiation and our teams continue to work incredibly hard.”

The cautious optimism that seemed to be emanating from Westminster, acted as a strong contrast to last week’s negative tone, pushing both the mid cap index and sterling higher, both considered reliable Brexit bellwethers. As more parts of the UK, including London, moved into tier 3 lockdown, it was the second tier of UK stocks that was on the up. By Thursday, the domestically orientated FTSE 250 had enjoyed four consecutive days of gains, predominantly driven by hopes of a post Brexit trade deal. Sterling also joined the party, rising over $1.36 on the US dollar, a two and a half year high. 

Whilst investors took heart from events in the City of Westminster, Thursday also saw those in the City of London make their impact on markets. The Bank of England (BoE) announced that it was ready to tolerate an inflation spike in the event of a no-deal Brexit and would also keep its stimulus unchanged. The BoE, as widely anticipated by the market, did not add to its £895 billion bond purchase programme, after ramping it up by £150 billion last month, announcing it would continue purchases at their current pace until early February at least. Amid some speculation of a rate cut, the central bank also kept interest rates at 0.1%.

On the economic data front, across the pond was where the most critical release was to be found, US retail sales, a useful gauge of just how the world’s largest economy is performing.  Data showed that sales fell more than expected in November, likely weighed down by raging new COVID-19 infections and decreasing household income, adding to growing signs of a slowdown in the economy’s recovery from the pandemic recession. This was the second straight monthly decline in retail sales reported by the Commerce Department.

Next week

The last few days before Christmas usually mean a quieter period for markets; however, with COVID cases continuing to rise and a potential Brexit deal in the offing, this year could well be different. 

The countdown to Christmas always represents an important time for the high street with the majority of retailers relying on the festive period to balance their books. With this in mind, the Confederation of British Industry (CBI) releases its realized sales numbers. The figures themselves represent a survey of about 125 retail and wholesale companies which asks respondents to rate the relative level of current sales volume. It acts as a leading indicator of consumer spending because retailer and wholesaler sales are directly influenced by consumer buying levels and can really aid analysts in gauging just how well the high street is performing. 

With consumer confidence having taken a severe knock during the onset of the Coronavirus, many will be hoping Tuesday’s numbers for Europe, although not expected to be too positive, will at least indicate some sort of bounce back from March’s nadir. The survey that is released is well respected amongst investors as around 2,300 consumers are asked to rate the relative level of past and future economic conditions, including their personal financial situation, employment and intentions for major purchases.

The end of the week sees most western markets close in observation of Christmas Eve and the big day itself.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in December 2020.