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“Investors seemed to breathe a sigh of relief that the coronavirus restrictions (in England at least) aren’t as severe as back in March and, taking its cue from yesterday’s strong showing on Wall Street, the FTSE 100 made solid gains to trade in the vicinity of 5,900,” says AJ Bell Investment Director Russ Mould.
“Also helping the index was strength in the dollar relative to sterling – actually a sign of continuing nervousness in the markets which was also reflected in mixed trading in Asia overnight.
“When the pound falls against other major currencies it boosts the relative value of FTSE constituents’ overseas earnings.
“With a second wave of infections now in evidence in many countries the market faces the tricky task of understanding how businesses will live with Covid-19 until there is a vaccine. This makes predicting earnings for 2021 very difficult and it helps explains why volatility is returning to the markets.
“After a spring and summer of recovery and consolidation, equities could face a difficult autumn and winter as the end of the Brexit transition period and US Presidential elections also loom.”
SSP
“Many companies are in a tricky situation given the latest guidance from the UK Government on working from home and tighter restrictions across the country. It creates even more uncertainty over when businesses will see life return to normal.
“SSP is certainly affected, with its recovery plan somewhat derailed by the latest coronavirus flare-up. Sentiment is going to remain fragile towards getting on a train or going on a plane, and so SSP’s outlets in rail stations and airports could have greatly reduced footfall.
“Two months ago it looked like the country was starting to get back on its feet and travel volumes began to pick up. That was music to the ears of SSP which had raised a large sum of money to help see it through the crisis. The company was also doing its best to cut costs and be ready for when demand for its food and drink outlets returned.
“It’s now a case of two steps forward, one step back as it seems likely that earnings could come under new pressure, at least for the UK operations. Fortunately SSP also generates revenue from other parts of the world where the pandemic is at different stages of being, or not being, under control and this diversification of earnings could be to its advantage.
“To its credit, SSP says cash burn in the second half has been lower than previously guided, meaning it still has plenty of liquidity to see it through a prolonged crisis. Companies like SSP must simply accept that the recovery is not going to be a smooth ride.”
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