Just as the opening of advent calendars brings joy (and chocolate), the UK Stock Market has a habit of delivering festive cheer in December.

With the FTSE 100 continuing to push onto new two year highs, this feature is most welcome. Company profits continue to meet or beat expectations, creating an all-round feel-good factor for the market.

The only major issue holding back some of the largest of our large companies is the fact that many of them derive substantial income from the US.

The dollar continues to weaken, meaning that sterling equivalents lessen. That shopping trip to New York keeps getting more economically viable.

This having been said, however, the GDP growth in the US is buoyant, so businesses operating in the US are benefiting, despite currency factors.

This time last year, the consensus expectation for US GDP growth was 4.2 per cent.

While 2004 is not quite over, we know that the final quarter got off to a good start, with the strong non-farm payrolls and the industrial output numbers for October.

The former should help retail sales and housing, both of which have been favourable all year anyway, and the latter should help investment as excess capacity diminishes.

On the face of it then, the year should finish on a firm note, leaving US GDP growth somewhere around 4.5 per cent, about a quarter point ahead of what was expected, and moreover, well ahead of what the Federal Reserve regards as the economy's sustainable non-inflationary growth rate.

So what does this all mean?

With continuing growth, US interest rates are expected to be increased - possibly ending 2005 somewhere in the region of 3.5 per cent to 4 per cent.

Higher interest rates should give some support to the flagging dollar.

The booming economies of China, Russia and the Ukraine need somewhere to park their growing trade surpluses.

These have traditionally resulted in buying dollars as foreign currency reserves, or investment in US treasuries.

With low US interest rates and little action seen to be being made to strengthen the US dollar, it came as little surprise last week that Russia announced that it is considering buying euros instead.

This could be quite a serious development and, on balance, there seems little to prevent the US dollar falling further, and heading to $2 to the pound sooner rather than later.

It is perhaps best to proceed with caution, therefore, if considering investing in what is still the biggest economy in the world by some significant margin.

Returning to the UK market, today sees results from Compass Group. This is the catering group that is responsible for school meals.

Although underlying sales grew by 7 per cent last year, margins have been squeezed by rising costs.

Schoolchildren and parents will be staggered at how they can make a loss on the fare served up to the poor darlings.

Compass is still a big company, though, so expect profits to be broadly unchanged at around £660m.

Tomorrow sees full year numbers from accountancy software giant Sage. This is the North-East's only FTSE 100 company.

Having already published a detailed trading statement, there are unlikely to be any great surprises.

Revenues are expected to be 29 per cent ahead.

Pre-tax profits are expected to be up 20 per cent at £181m, thanks to a mixture of acquisitions and underlying sales growth of 6 per cent.

For investment advice contact Anthony Platts on 01642 608855.

Published: 30/11/2004