FTSE Surges As Risks Dispel
The FTSE 100 jumped sharply higher on the open and has been building on those gains across the session. The UK index touched 2.5% of gains as risks that have dominated across 2019 dispel. With clarity on Brexit and a first phase trade deal agreed investors are more than ready to jump aboard the Santa rally.
This is the last full week of trading prior to the Christmas break, which means that volumes will be starting to thin out and any moves in the market could be exaggerated.
Not even a stronger pound was holding the FTSE back as traders buy into Friday’s market friendly election result. Investors had given UK stocks a wide birth amid Brexit and domestic political risk. With the fog of uncertainty starting to clear, the FTSE is looking undervalued compared to its European and US counterparts.
Pound dismisses dismal data
The pound was still in positive territory moving towards the European close, as investors focused on Boris Johnson’s resounding victory and his will to get Brexit done, which overshadowed the dismal UK PMI data.
UK private sector activity slumped again in December, weighed down by sharpest drop in UK manufacturing activity output in over 7 years. Overall output dropped to 48.5 in December, down from 49.3 in November and a 41-month low. Manufacturing fell to 4.4, well below the 49.2 forecast. The dominant service sector also contracted at a faster rate than forecast.
The UK economic is in a pretty sorry state as we head towards the new year. Brexit related aversion to investment combined with a pre-election hit on consumer confidence has left the UK economy on its knees just ahead of Brexit. Boris Johnson certainly has his work cut out to restore confidence and turn the economy around.
This is by no means the end of the road for Brexit uncertainties. The path ahead is full of obstacles with trade negotiations and just one year in get the deals in place. We expect volatility in the pound to pick up again next year.
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