Market Monitor - 18 December 2020
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Market Monitor – 18 December 2020

Global stock markets hit record highs this week as optimism about new stimulus measures in the US and a potentially happy outcome to Brexit negotiations in Europe brought some pre-Christmas cheer. In both cases, however, it remains to be seen whether agreements can be reached before politicians in Washington, London and Brussels take their end-of-year break: but investors appear willing to believe there are strong grounds for hope.

There was more positive news for markets this week as the US launched its Covid-19 vaccination programme – a development that, given the high infection rate and current round of lockdowns across the US, has not come a moment too soon. Meanwhile, following the green light from health regulators, major economies in Europe have signalled they will begin their own inoculations before the end of the year.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 18 December 0.9% up for the week so far, with the S&P 500 1.6% ahead – gains that meant both indices were at their all-time highs. The main driver for US stocks this week has been the signs that Congress will shortly pass the Covid-19 stimulus bill that has been in the pipeline since well before November’s presidential election. This is expected to pump $900 billion into the beleaguered US economy – somewhat less than had been hoped for in the autumn, but given the spread of coronavirus in recent months and the widespread reintroduction of lockdown measures across the country, a desperately needed sum. News this week that US unemployment figures were considerably worse than expected only served to reinforce investors’ expectations that a stimulus deal is surely just around the corner.

Europe

IIn the UK, the FTSE 100 ended Thursday 18 December just 0.1% ahead for the week. Gains among the biggest British companies were trimmed by the strength of the pound, which rose on hopes that the UK government was on the verge of striking an 11th-hour trade deal with the European Union. While Brexit optimism helped the share price performance of the more domestically focused business in London – not least banks and construction firms – the international nature of the FTSE 100 means the index is invariably held back by any appreciation in sterling. Meanwhile, latest figures show that the UK is suffering its own jobs crisis, with redundancies having soared in the autumn – and with worse data likely to come as a result of more recent lockdowns. But the chancellor, Rishi Sunak, has this week confirmed another extension of the government’s employment subsidy scheme, which will now remain in operation at least until the end of April.

In Frankfurt, the DAX index ended 18 December up 4.2% for the week, while France’s CAC 40 gained 0.8%. Another week of outperformance for German shares was fuelled not just by Brexit and US stimulus developments, but also by unexpectedly strong manufacturing and service sector data published on Wednesday 17 December. In addition, the news that Germany will start administering the Pfizer/BioNTech coronavirus vaccine on 27 December helped soften the blow that another nationwide lockdown is now planned for the Christmas and new year period.

11/12/2020
17/12/2020
Change (%)
FTSE 100
6546.8
6551.1
0.1
FTSE All-share
3680.4
3705.4
0.7
S&P 500
3663.5
3722.5
1.6
Dow Jones
30046.4
30303.4
0.9
DAX
13114.3
13667.3
4.2
CAC-40
5507.6
5549.5
0.8
ACWI
629.8
641.9
1.9
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 18/12/2020.
18 December 2020
Mark King
Head of Investment Content
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Market Monitor – 18 December 2020

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