UK markets consolidated during the festive period after receiving a considerable post-general election bounce. Lower trading volume, a feature of the festive season, seems to have also supported the recent strengthening of Sterling, which extended gains by 0.4% against the Euro and Dollar. Foreign Exchange traders shrugged off concerns of a no-deal Brexit, helping subdue the large-cap FTSE 100, with a stronger Sterling depreciating value in companies that report their earnings overseas, as is the case for several of the index’s constituents. However, as trading volume and UK politics begin to pick up, expect greater fluctuations in investor sentiment and market prices, with traders no doubt keeping an eye on the looming Brexit deadline.

The new year has been welcomed by a flurry of news that will further boost UK and global markets. On 31st December, Donald Trump announced that he would be signing a first-phase trade deal with China on 15th January. This represents a significant step in resolving the long-standing trade war between the world’s two largest economies that has placed a strain on global markets. The deal is believed to consist of the US lifting several tariffs in exchange for China agreeing to buy more US farming products and committing to improving intellectual property protection. President Trump indicated that he would be travelling to Beijing to begin talks on phase two of the deal. A lessening of the tensions between the US and China will be beneficial for the global economy and will boost investor sentiment. China’s central bank reinforced the positive new year sentiment by cutting the reserve requirement ratio for commercial lenders by 50 basis points in a significant move to stimulate economic growth. This reduces the amount of cash banks are required to hold, freeing up approximately $114.9bn in funds to lend to private companies and small businesses in the hope of invigorating the world’s second largest economy.

Since directorate changes at the beginning of December, WM Morrison has seen its share price rise, gaining 4.5% since 4th December. Investors’ attention will now turn to the supermarket giant’s imminent trading update for the third-quarter and Christmas period to be released on 7th January. This update is expected to be mixed, as WM Morrison has struggled to gain significant momentum, currently sitting down 6.94% for the last 12 months. A likely cause stuttering sales momentum owing to pre-Christmas political uncertainty in the run-up to the general election. Early signs from the newly-elected Conservative government indicate that central policy will be beneficial to constituencies that enabled the election landslide. This will place huge emphasis on investment in areas WM Morrison is disproportionately biased to. Together with improved consumer sentiment following the election result, this means that the retailer is likely set for a more positive 2020.

Investments can fall as well as rise in value and your capital is at risk. This communication does not constitute a recommendation to buy or sell the investments mentioned. Past performance and forecasts are not reliable indicators of future results or performance.