Market snapshot: the Christmas economic outlook

Slow Brexit talks hit sterling, and FTSE 100 remains down, though US markets look positive.

Sluggish progress on Brexit negotiations is tightening the screw on sterling as the potential for stalemate looms increasingly large.

The beleaguered UK economy, already under pressure from the fallout of the pandemic and the new trading environment with Europe, whatever that may be, meant mixed news in the meantime.

An improvement in consumer confidence was something of a welcome surprise given the backdrop, but retail sales succumbed to the second lockdown imposed in November. 

Unsurprisingly, online, food and household sales helped improve the overall inflation figure of 0.3%, which was better than expected despite the fall from 0.7% in October. The Black Friday event and the traditional round of festive shopping also provided some thrust.

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The FTSE 100 has not been able to build on the momentum of a strong showing since the beginning of November. It remains down by 13% in the year to date. The overarching concerns around Brexit and the pandemic continue to cast a shadow on sentiment, while the very nature of the index itself has also stunted progress. 

An exposure to the likes of the oil and banking sectors in particular proved a headwind during the course of the year.

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There seem to be few such worries for the US markets, where a $900 billion £664.86 billion) stimulus package is looking increasingly possible and lifting all boats in the process.

The year has been one where the major indices have provided what would have been strong returns in normal times, let alone during these extraordinary circumstances. With investors anticipating a recovery in fortunes next year, bolstered by further monetary and fiscal support, each of the indices are at or nudging all-time highs, with the Dow Jones ahead by 6.2%, the S&P 500 15.2% and the Nasdaq 42.2%.

Trading activity is now winding down leading into the seasonal break, which could lead to added volatility in the days to come when set against the reduced volume.

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Full performance can be found on the company or index summary page on the interactive investor website.