Bumper Christmas for supermarkets

In mid-morning trading, the FTSE 100 is 4 points higher, as Morrisons posts a healthy trading update for Christmas.

- UK supermarkets toast the Christmas period

- Fresh losses for sterling

- Euro strength casts a gloom over eurozone stocks

Supermarkets and miners are the darlings in London this morning, as the FTSE 100 moves to another record high in early trading. Morrisons has put its best foot forward, recording an excellent Christmas and lifting the gloom cast over the general retailing universe by Next’s poor figures last week. Tesco has rallied in sympathy, with investors evidently thinking that if Morrisons can turn in a good performance then the UK’s biggest supermarket will also have had a good festive period. These two posted impressive share price performances for 2016, while Sainsbury’s fell short, and so far this morning the UK’s second-largest grocer can only manage a modest 1.7% gain. It looks like fears of Sainsbury’s being the ‘squeezed middle’ are being revived. Once again a softer dollar and a weaker pound are providing the perfect cocktail for gains in London, helping to boost both the mining sector and the consumer giants that benefit from a drop in sterling. The implications of the pound’s fall from grace are yet to be felt in full, but investors in the likes of Unilever and others will definitely be hoping that October’s lows in cable are taken out soon.

Friday’s post-NFP rally in the US dollar index proved to be a selling opportunity for those brave enough to take it, and while the price has rallied off the lows it looks like further weakness is in store, especially since there is little data today to drive a recovery. The fall in the dollar spells good news for gold, but bad news for stock bulls in Europe, who are watching the euro’s residency around $1.06 with increasing concern. Ahead of the open, we expect the Dow to start at 19,899, up 12 points from Monday’s close.