UK blue-chips are edging higher this morning but overall it’s been a quiet start to the week for the FTSE as the benchmark treads water after a decent rise last week. It’s a similar story for the pound too with the GBP/USD rate remaining within it’s recent near-term range and above the $1.31 handle after experiencing its largest drop in over a year last Friday.
Next shares jump on sales beat and improved outlook
The best performing stock in the FTSE this morning is Next, with the retailer rising by around 8% after its latest trading update. Next announced a 4.5% increase in year-on-year full-price sales - well above the 1% guidance from the group in January and comfortably higher than May’s 2.2% guidance. After a bumper July period the group had cautioned of a possible slowdown in August but a strong performance in in the latter and early September has seen the firm raise its expected full year before tax profit to £727M - £10M higher than the previous forecast. Shares have been trending lower in the past couple of month after peaking in mid-July but today’s jump higher could mark a sharp turning point and investors will be hopeful that the moves gains traction going forward.
Labour to vote down May’s deal
The main Brexit talk today centres on the opposition, with Labour confirming that they will vote against Theresa May’s Brexit deal. The shadow Brexit Secretary, Keir Starmer, is expected to tell delegates in a speech today that they will vote against the current proposal from the government because it fails to meet his six tests. Starmer also stated that the party would oppose a vague agreement with the EU which he calls a “blind Brexit” and while the stance is hardly surprising it does provide an official stance for the opposition. The pound is attempting to recover this morning, trading marginally higher against all of its peers but this is more likely due to a rebound from Friday’s strong selling than a positive reaction to these comments.
BoE to provide more communication on QE unwind
Another story being followed by pound traders today is comments from BoE member Gertjan Vlieghe who has stated that the bank will look to gradually unwind its Quantitative Easing programme in a well communicated manner when the time to act comes. However, with the bank saying in June that it won’t consider reducing the stock of QE until the bank rate is at 1.5% there is still some way to go. For the base rate to get anywhere near this level in the next couple of years it would require an extremely benign market reaction to the eventual Brexit deal and the bank’s policy will remain highly dependent on developments on this front for the foreseeable future.