Market snapshot: Wall Street latest and FTSE 100 reshuffle stocks

Light trading in US markets leading up to the Thanksgiving holiday resulted in a slight decline across the major indices after what has been a breathless November, following an election result which has largely been seen as heralding a new era of growth for the economy.

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This in turn has led to a more complicated picture for the Federal Reserve, since most of the likely measures to be introduced by the new administration could prove to be inflationary at a time when the last mile of the battle remains hard-fought. The latest release of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, rose by 2.8% annualised in October from 2.7% in September and by 0.3% on a monthly basis, although both were in line with expectations.

While a further interest rate cut is still mostly expected at the December meeting, the outlook for next year has been dialled back and the deceleration of the Fed’s easing programme is becoming increasingly possible.

The Thanksgiving holiday, which sees the markets closed later today and then back for a shortened session tomorrow, also leads into Black Friday, with Cyber Monday to follow. The consumer is central to the fortunes of the wider economy and an expected record-breaking spending spree which could approach $300 billion this weekend alone, spread across an estimated 185 million people shopping online and in store, could boost sentiment in the nearer term.

Investors will equally be scrutinising the numbers for any signs of weakness, such as the consumer pulling back some spending given the current state of the housing market and a potential rise in unemployment, even though this has yet to appear to any large degree. 

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In the meantime, the main indices approach the final month of the year in rude health. In the year to date, the Dow Jones is ahead by 18.7%, the S&P500 by 25.8% and the Nasdaq by 27%, with each having hit record highs on any number of occasions over recent months as the appetite for investment risk has remained undiminished.

In the UK, the main indices made a positive start, despite the headwind for the premier index of the usual ex-dividend factor on Thursday each week. The likes of Marks & Spencer Group (LSE:MKS), Land Securities Group (LSE:LAND), United Utilities Group Class A (LSE:UU.) and Severn Trent (LSE:SVT) were each marked down by the amount of their latest dividend payments, while further pressure came from Aviva (LSE:AV.), whose shares fell by almost 2.5% as it revealed that a £3.3 billion offer for Direct Line Insurance Group (LSE:DLG) had been rebuffed.

Shares in Direct Line flew up 37% in the FTSE250, although significantly shy of the 250p level which the bid implied, suggesting that this approach may have further to go. Direct Line considers that the price offered significantly undervalues its prospects and amounts to a highly opportunistic bid, and it remains to be seen whether Aviva accepts this description and returns with a higher offer.

The news of bid activity read across to Admiral Group (LSE:ADM), whose shares rose by 3%, while there was also buying interest in Tesco (LSE:TSCO) and Sainsbury (J) (LSE:SBRY) following a broker upgrade. Steam management manufacturer Spirax Group (LSE:SPX) also rose by around 3%, propelled by upgrades from two brokers, and the aggregation of positive news was enough to push the FTSE100 higher in early trade to now stand ahead by 7.2% so far this year.

FTSE100 reshuffle

The final reshuffle of the year will almost certainly involve two stocks and possibly another four. Outside of the debate is Investec (LSE:INVP) which, while at a level which would normally guarantee comfortable promotion, has its primary listing in South Africa, thus prohibiting inclusion in the premier index. This was also in evidence earlier this year when Flutter Entertainment (LSE:FLTR) lost its FTSE100 status following its decision to move its main listing to the US.

In terms of near certainties, the merger of Alliance Trust and Witan to form Alliance Witan Ord (LSE:ALW) was confirmed in October, creating a group with a market capitalisation of £5.1 billion with the December reshuffle being the first entry point for its inclusion. Barring a last minute miracle, Vistry Group (LSE:VTY) will be moving in the opposite direction in what has turned out to be a brief appearance in the premier index. Promoted to the FTSE100 in June, the share price has since been flattened as a result of a profit warning and a subsequent guidance cut. The shares have lost 47% over the last six months and 31% in the last month alone, cementing its fate.

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Elsewhere, there are further likely, but not yet guaranteed changes. Frasers Group (LSE:FRAS) are on the very edge of relegation, which would result at current prices in its being replaced by St James's Place (LSE:STJ), whose shares have rocketed by 72% over the last six months since around the time of its own demotion from the FTSE100 in June. There is also the possibility that B&M European Value Retail SA (LSE:BME) could lose its place, which would open the door for the promotion of Games Workshop Group (LSE:GAW). The Warhammer and miniatures retailer has seen its shares rise by 42% over the last six months, most latterly boosted by a strong trading update.

The reshuffle will be based on prices as the markets shuts on Tuesday 3 December, with the announcements made after close of play on Wednesday 4th, with the changes becoming effective on Monday 23 December.