FTSE and GBP set for weekly gains

Summary:

• UK stocks on track to post 2nd week of gains

• GBPJPY and GBPCHF the biggest gainers for pound pairs

• Ocado shares surge on Aeon deal

It’s been a positive week on the whole for UK assets, with both the FTSE 100 and the pound on track to post solid gains. The blue-chip benchmark is set for a second consecutive weekly gain with the bulk of the rally coming on Monday’s open as equities around the globe gapped higher over the weekend on further hopes of a US-China trade deal. Since then the market hasn’t really done much with some fairly subdued trade that has been caused in part by it being Thanksgiving week in the US. The index is around 2% higher than where it ended last month and while it still lags behind its international peers the market seems well placed for further gains heading into year-end.

The pound is rising across the board in the past week, with the largest gains seen against the perceived safe haven currencies of the Japanese Yen and the Swiss Franc. Source: xStation  

The rise in the pound has also been solid if not spectacular, with the currency appreciating against all its major equivalents in recent days. The reason behind this move is likely the release of the most eagerly anticipated election poll yet, which suggested the Conservatives are on track for a sizable majority. Similar to the gains in stocks this wasn’t the easiest to trade, given that the market was rising into the release and has actually not done much since the poll results were announced.     

Ocado shares surge on Aeon deal 

The standout performer on the FTSE is the Ocado Group, with shares enjoying a double-digit jump after it was announced that the online supermarket has struck a deal with Aeon, a leading grocery firm in Japan. This marks Ocado’s first foray into the Asian market and opens up a large and fast-growing sector. This deal is another example of the company’s expansion strategy which is focused on partnering with local supermarkets who are looking to implement Ocado’s competitive advantage for home deliveries and utilise their expertise in automated warehouses and software applications.

In terms of the details, Aeon will pay Ocado an upfront fees in addition to ongoing payments that will be contingent on the performance of the venture and based on metrics such as sales. This approach seems to be working for Ocado as they match their core strength with local retailers who have a far better knowledge of their domestic market and therefore they can avoid many of the pitfalls experienced by competitors, such as Tesco, who made unsuccessful attempts to branch out into new markets. Shares in Ocado have rallied by more than 70% year-to-date and trade just 6% from their record high set back in April.