The FTSE 100 is expected to open lower this morning amid frets over rising coronavirus infection rates at home and abroad, and a worries that the economic bounceback seen since lockdown lifted may not be sustained.
The blue chip index was forecast to open 30 points lower at 5,977 after a choppy week last week. Markets initially rose on a step up in M&A activity – notably Nvidia’s blockbuster takeover of tech giant ARM in the UK – before slipping back as European Covid infection rates marched up.
This week’s tone is set to be steered by central bankers with US Federal Reserve chairman Jay Powell set to appear several times across the Pond and Bank of England Governor Andrew Bailey making an address over here.
Powell is in a tight spot with US president Donald Trump keen to talk up the state of the country and the crisis in the run up to November’s election.
CMC Markets analyst Michael Hewson observes: “Last week we saw central bankers sow a fair deal of confusion and uncertainty about the glide path of their next policy steps.
“Fed chairman Jay Powell certainly has his reasons for being deliberately opaque this close to the US election, however he was very clear that US rates would not be going where between now and 2024, even if he wasn’t prepared to spell out exactly how the Fed would go about looking to achieve this.”
Meanwhile in the UK, Bailey will tomorrow address the British Chamber of Commerce conference. Investors will comb the speech for hints as to whether interest rates could turn negative, which could weaken sentiment. He could also give an insight into whether the Bank thinks the economic bounceback seen since lockdown lifted will be sustained or whether it will quickly lose steam.
Looking at specific stocks, HSBC shares will likely be in focus this morning. News reports in China claim that the lender might be put on the country’s unreliable entity list as a threat to national security.
Hewson adds: “If this were to occur it would make it extremely difficult for the bank to operate in what is one of its most important markets.
“The banks share price was also under pressure in Asia this morning after being named in a banking report along with Standard Chartered in a list of banks that have conducted business with dubious counterparties.”
And Ocado’s stock is worth adding to the watchlist. The online grocer is snapped at the heels of Tesco to become Britain’s biggest retailer – with a valuation of £21 billion to Tesco’s £21.5 billion – and could well overtake its more established rival this week.
If that happened, it would reignite the debate over whether Ocado should be seen as a retailer, given its value is tied to its status as a tech company licensing out its specialist technology and operations.