FTSE up at the start of another crunch week for Brexit, and challenging situation for new Lloyds CEO

“The FTSE 100 made a decent start to the week amid some signs the coronavirus restrictions in the UK are working as infection rates fall.

“It feels like Groundhog Day when it comes to Brexit as we enter yet another ‘crunch week’. However, with just a month until the end of the transition period something definitely has to give – we should soon know if it is deal or no deal,” says AJ Bell Investment Director Russ Mould.

“The top gainer on the FTSE was JD Sports amid the latest machinations in the retail sector as the company reportedly prepared to step back from its Debenhams deal – a response which reflects market perception of the risks attached to this transaction. Elsewhere its rival, Mike Ashley’s Frasers was readying a potential loan for the stricken Arcadia Group.

“Retailers continues to feel the effects of the pandemic and further consolidation, failure and change in the UK retail landscape seems likely.

“BP and Royal Dutch Shell fell amid renewed volatility in oil prices ahead of today’s OPEC summit. An extension to production quotas is expected but the producers’ cartel has confounded expectations in the past.”

Lloyds

“The next man in the hot-seat at Lloyds faces a pretty stiff test. While Antonio Horta-Osorio’s long reign has been a mixed bag, he did achieve some of the big milestones in the recovery from the credit crunch. Perhaps most notably was the long-awaited return to the dividend list.

“While the pandemic has forced a new dividend hiatus it is hard to believe the reintroduction of the payout under his appointed successor Charlie Nunn will register quite the same impact.

“Poaching Nunn from a senior role at rival HSBC may feel like a coup but it is fraught with some complication given his notice period and other restrictions – Lloyds needs the transition to be as smooth as possible given the rough waters it is entering, with Horta-Osorio already slated to depart next June.

“Horta-Osorio was leading Lloyds out of a crisis, yet Nunn will be leading the company as it heads straight into one – with the full impact of the coronavirus pandemic on the economy yet to hit.

“As unemployment mounts, the company is likely to see pressure on its credit book and while the PPI scandal is the rear-view mirror, Nunn will still face an ultra-low interest rate environment and a tough regulatory backdrop.

“The good news is that Lloyds’ balance sheet is in a much better position to absorb bad debts than it was back in 2007/8.”

These articles are for information purposes only and are not a personal recommendation or advice.