5 February 2021

Is the end in sight?

After nearly a year in lock down, can we hope for more freedoms in 2021? Brian Tora gives his views.

At least the days are getting longer, even if the weather remains fickle. Centre stage to sentiment at present is the speed at which the NHS is getting jabs into vulnerable people’s arms. Our late partners in the European Union must be gnashing their teeth over our foresight in ensuring we would be well supplied with vaccines to endeavour to combat this pandemic. It has led to some ill-considered action on their part, thankfully now abandoned. If leavers wanted any justification for their stance, the EU has provided it.

The apparent success of the vaccine roll out here has done the pound no harm.  Having pointed out recently that sterling appeared cheap according to the Big Mac index, which compares the price of the hamburger around the world, our currency has been posting modest, but steady gains. Good news for holidaymakers, except we can’t really go anywhere at present. And it is not necessarily good for exports, though there are mixed signals on this front at present as the reality of Brexit sinks in.

Our benchmark FTSE 100 Share Index has tended to drift during recent weeks. In a way this is not surprising as the international bias of this index means that a strong pound can have a negative impact on the reported profits of many of the constituent companies. But at least the market has become somewhat steadier as confidence builds that an end is in sight to the lockdowns. The only fly in the ointment seems to be the rapid way in which the virus mutates, but hopefully the scientists can now deal with this.

We are now beginning to see results from companies that adopt the calendar year as their trading period. Both Exxon Mobil and BP posted significant losses for the year just ended. True, BP was in profit for the fourth quarter, though this was entirely due to the sale of their petrochemicals business. The economic downturn brought about by the pandemic is taking its toll on the oil majors, while other businesses, such as those in the technology sector, have undoubtedly benefitted. It seems a fitting time for Jeff Bezos to step aside at Amazon.

The monthly meeting of the Bank of England’s Monetary Policy Committee – the body that sets interest rates in this country – is unlikely to deliver any surprises. With rates at rock bottom and the economy still on the back foot, no change was expected. The Budget due in March should be of more interest, though it looks as though Chancellor Sunak will not wish to renege on manifesto commitments. Tax rises are inevitable, though, with corporation tax and capital gains tax looking the favourites for attention.

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