he FTSE 100 was set to rise today as cautious hopes of a Brexit trade deal grew.
London shares were expected to push the index up around 20 points following a strong showing for equity markets in Asia this morning. Japan, Hong Kong and Australia all rose 1% or more amid hopes of a US coronavirus stimulus deal.
US stocks put in a strong performance last night, closing up 1.3% after discussions were announced by Congress of talks for a new fiscal support plan that would help the world’s biggest economy recover from the Covid impact.
It came as some were predicting the Federal Reserve would take action later today in its final meeting of the year to extend its bond buying programme.
In the UK, hopes of a Brexit deal rose after MPs were forewarned of an extended House of Commons sitting next week.
Boris Johnson has repeatedly warned no deal is the most likely outcome but financial markets are choosing to take this as negotiating bluster and have priced in a deal of some sort.
The Financial Times today reported that some Tory eurosceptics have indicated they would tolerate the deal now taking shape and Jacob Rees-Mogg, leader of the house, has suggested he could get the treaty ratified by Parliament in 24 hours if needed.
The FTSE 100 closed down yesterday as the pound rose on hopes of a Brexit deal, ending off 18.51 points.
Housebuilders had a strong session which may be reversed somewhat today on the news that Conservative councils in the shires have successfully fought back against the government’s plans to force them to permit new homes to be built.
Instead, cities, often Labour run, will be forced to bear the brunt under new plans from housing secretary Robert Jenrick today. The latest U-turn on housing policy could be seen as a negative for the industry as it signals another period of wavering support for pledges to build.
Taylor Wimpey, Bellway, Barratt and Redrow all got glowing testimonials from brokers yesterday.
Following yesterday’s bleak unemployment data, today brings the inflation numbers for the UK with expectations that the consumer prices index will slip back from 0.7% to 0.6% and core inflation will edge down to 1.4% from 1.5%.
Any increase would spook markets as it could persuade the Bank of England to be more cautious about the flood of QE and low interest rates currently propping up the UK economy.
Today also brings “flash” purchasing managers’ index scores – quick snapshots of how the economy is faring. The are likely to show December shaping up better than grim November, with manufacturing scoring a resilient 56 and services rebounding to 50.7. Any score above 50 means expansion.
However, the expansion of lockdowns today means even the flash PMIs will probably soon look out of date.
Similarly, lockdowns across Europe are likely to overshadow their PMI scores, which were already expected to be weak, with the exception of Germany’s manufacturing sector.
US retail sales are likely to come in slightly weaker for November in what CMC Markets called “another warning sign for the US economy.” Futures indicated a slight cooling of US stock markets this afternoon following yesterday’s strong gains.