FTSE 100
The FTSE 100 is set for a higher fuelled by the rising optimism of a Brexit agreement between the EU and the UK. The blue-chip index is trading at £6,475, which is substantially higher than this week’s low of £6,310.
What happened: Overnight, most media reports suggested that the UK and EU were about to make a Brexit deal. That will be a good outcome after months of back-and-forth negotiations. It will reduce the immediate risks of border checks and tariffs between the two sides.
Why it matters: Companies in the FTSE 100 will benefit from a Brexit deal in several ways. For one, they will gain from a relatively strong UK economy. That’s because, a Brexit deal will prevent the economy from falling by about 2% as most economists expect. Second, a deal will be a good thing for FTSE banks like Lloyds and NatWest because it will reduce the possibility of negative rates.
Third, as mentioned above, a deal will prevent border security checks and tariffs between the UK and the EU. Such measures would have been damaging to the UK economy, which sells billions worth of goods to the EU.
Companies to watch: With focus being on Brexit, the key companies to watch will be banks like Standard Chartered, NatWest, Barclays and Lloyds. Companies with vast interests in the EU like Meggitt, Melrose Industries, and Rolls-Royce will also be in focus.
On the daily chart, we see that the FTSE 100 index has been on a strong upward trend. It is slightly below the 61.8% Fibonacci retracement level and slightly higher than the 25-day and 15-day moving averages. Therefore, the index will possibly continue rallying during the shortened Christmas Eve session. However, in case of disagreements, we expect that it will retest the weekly low.
