Sterling steady in wake of spending review

Heading into the close the FTSE 100 is down 50 points, as stocks lose some of their forward momentum. 

• Market euphoria dims slightly
• Tech looks stronger for a second day
• Sterling stable despite gloomy UK economic outlook

After yesterday’s gains today has a more muted feel to it, although with Thanksgiving just a short time away we were unlikely to see much volatility as US traders look to get through the day without any major upsets. But Wall Street can skip off to their turkeys in the knowledge that the stock market continues to perform well in the face of the global pandemic, fortified by vaccine news and the decision to appoint Janet Yellen as Treasury Secretary. Apart from annoying Donald Trump, who opted to replace her with Jerome Powell, the move has the additional bonus of signalling the arrival of a policymaker committed to ensuring the US recovery is set up on a solid basis. Yesterday’s market action saw a revival in tech stocks, which have ceded their crown as the star performer recently to small caps, but it looks like some of those flows are reversing as the gap in valuation narrows, providing a boost to the attractiveness of the growth names in the Nasdaq. 

As usual the contents of the chancellor’s statement today had been largely pre-briefed, so the impact on sterling has been minimal. The pound has maintained its strength against the euro and the dollar, bolstered by continued hopes of some kind of Brexit deal, or a variation of the current situation at least to allow more time for stalled talks to produce a breakthrough. Economies have been given a hospital pass where spending is concerned right now, investors rightly prioritising the continuation of support measures in the near term rather than any adherence to the old shibboleths of prudent budgeting.