The FTSE 100 is in positive territory as the pound is being punished for the lack of political progress on the Brexit talks. The British equity benchmark has a relatively high level of overseas exposure so the slide in sterling makes in more attractive to investors.
Tesco (LON:TSCO), Morrisons (LON:MRW) and Sainsbury's (LON:SBRY) are all higher this morning after Goldman Sachs (NYSE:GS) wrote a positive note about the UK supermarket sector. The Wall Street titan stated that margins in 2018 should be more generous than in 2017 as the different between inputs costs and consumer prices for foods is diminishing. Deep discount supermarkets like Lidl and Aldi aren’t as aggressive in terms of pricing strategy according to Goldman Sachs – which is giving Sainsbury's, Tesco and Morrisons breathing space.
GBP/USD is under pressure as political uncertainty is hanging over the British government in relation to the Brexit talks. While the issue of the Irish boarder remains unresolved, sterling is likely to remain in the red. To make matters worse for the pound, the UK services PMI report fell to 53.8 in November from 55.6 in October – the slowdown in the expansion rate is slightly worry.
EUR/USD is in the red as a broad push higher in the US dollar is hurting the single currency. The greenback is in demand after the US Senate voted in favour of the tax reforms that President Trump’s promised on his way to the White House. Strong services figures from Italy and France this morning couldn’t prevent the decline in the euro. The French services sector hit its highest level since 2011, which proves the European Central Bank (ECB) loose monetary policy is working.
At 3pm (UK time) the US will announce the ISM non-manufacturing report and the consensus is for a reading of 59, and that compares with Octobers reading from 60.1.
We are expecting the Dow Jones to open up 54 points at 22,344, and we are calling the S&P 500 flat at 2639.
Toll Brothers (NYSE:TOL) will announce their fourth-quarter results today.
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