Market snapshot and a FTSE 100 reshuffle prediction

US markets look set for a winning week but a losing month, with early Dow Jones futures pointing to a marginally positive opening.

After Thursday’s Thanksgiving holiday, Friday heralds a shortened trading day to round off the month. November has been dominated by AI-related concerns, both in terms of the huge sums being invested as well as a possible overvaluation in mega cap tech stocks.

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The flipside is that this could set the market up for a stronger final end to the year, with some investors looking to buy on the dip as the story remains largely intact. At the same time, it is anticipated that the Federal Reserve will cut interest rates the week after next which, all things being equal, would oil the wheels of the economy and boost investor sentiment accordingly.

Asian markets struggled to make headway overnight in the absence of a lead from Wall Street, exacerbated by a light calendar. In Japan, core inflation remained at 2.8% and unchanged from October, above the Bank of Japan’s 2% target. As such, a shift towards higher interest rates is expected on a gradual basis, although it seems unlikely that this will begin in December.

UK markets were off to a rather more sprightly start, with broker upgrades being the order of the day. The likes of Weir Group, IMI and easyJet were at the top of the leaderboard as a result, although a downgrade to Burberry exacerbated the recently tepid economic data coming out of China.

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Meanwhile, the negative momentum continued for Whitbread, where a double downgrade resulted in a 7.5% decline in the share price, leading to a dip of 14% over the last month, despite its recent guidance that the German business is likely to contribute a profit for the first time over the course of this year.

Despite those headwinds, the FTSE100 edged higher to take its cumulative gain to 18.8% this year, underpinned by the additional bonus of an average 3.1% dividend yield. Indeed, in terms of total returns, the more domestically focused FTSE250 is also in double-digit growth territory, with an index gain of 7.2% boosted by an overarching 3.5% yield.

FTSE100 reshuffle

The Stock Exchange’s first fly-by estimate, which will be confirmed next week, predicts that WPP (LSE:WPP) will lose its place at the top table, to be replaced in the index by British Land Co (LSE:BLND).

The increasing influence of AI in the space in which WPP operates has had a significant impact. It remains to be seen whether this will be a blessing or a curse and the early indications have been that investors consider there to be more compelling opportunities elsewhere. At the same time, a pullback in advertising spend caused the group to cut guidance for revenues to decline in a range of 5.5% and 6%, from a previous 3% to 5%, which has led to a fall of 64% in the share price in the year so far, apparently sealing the company’s fate.

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In contrast, British Land is enjoying a more positive direction of travel which has boosted its shares by 20% in the last three months, and by a net 13% in the year to date.

Progress on lettings and an upbeat outlook for next year have been major drivers, as the group continues its focus on retail parks, campuses and urban logistics. Its exposure to some prime real estate in London has propelled leasing activity, while its focus on science and technology underpins what could be a strong growth path for its campus business. The dividend yield of 5.6% is an additional attraction, and it seems likely that the group will regain its FTSE100 status, having been relegated in March.