Market Monitor – 21 August 2020

Market Monitor – 21 August 2020

Global stock markets were dragged lower this week by fresh concerns over the ongoing impact of the Covid-19 crisis and a lack of positive company or economic news. Investors remain worried about the state of the trading relationship between the United States and China: the two nations have agreed to hold new talks to evaluate the progress of the trade deal agreed at the start of the year, but a positive outcome is far from certain given ongoing coronavirus-related tensions. Markets had hoped for a boost from the US central bank on Wednesday, but the Fed refused to offer any significant additional stimulus measures – and its outlook for the US economy has become even more pessimistic, with growth and unemployment forecasts both deteriorating in the face of continued high infection levels across America. This week’s US jobless figures provided another unpleasant surprise, with new claims rising after last week’s fall. Meanwhile, very few countries are showing signs of being able to get Covid-19 under control: Germany this week reported its highest level of new daily cases since April, while even South Korea is now warning that the virus is spreading nationally.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 20 August 0.7% down for the week so far, although the S&P 500 had managed to creep ahead by 0.4% by the same point. Indeed, the S&P hit its all-time closing high on Wednesday, thanks largely to the performance of major tech stocks. This week Apple’s market cap hit $2 trillion, while the likes of Facebook and Amazon have fared better than most in the pandemic to date.

The UK and Europe

In the UK, the FTSE 100 ended Thursday 1.3% down for the week: the index is now almost 20% lower than when it started 2020. Airline shares have had another challenging week, with the British government introducing new restrictions on international travel which mean that visitors to countries such as Croatia, Austria and Trinidad must now observe a 14-day self-quarantine on their return. Retailer Marks & Spencer was one of the worst performers in London this week after announcing 7,000 job cuts. But UK inflation statistics suggest that demand across the economy may be heading back to more normal levels, while a bounce in property market activity provided a boost for British housebuilders. Earlier in the week, the announcement of new stimulus measures in China helped to increase the value of UK-listed commodities firms such as Anglo American and Rio Tinto, which provide raw materials for Chinese manufacturers. In Frankfurt, the DAX index ended Thursday’s session down 0.6% for the week, with investors increasingly concerned about a new rise in coronavirus cases in Germany – and their potential impact on the German economy. Deutsche Bank and auto manufacturer Daimler were among the biggest losers this week as a result. In France, the CAC 40 had lost 1% by close on Thursday: as in Germany, carmakers also suffered, with Renault and Peugeot both losing value as the prospect of new coronavirus-related movement restrictions loomed. Looking ahead, investors are still waiting for lawmakers in Washington to agree a new stimulus package for the US economy – but there were encouraging signs this week when Nancy Pelosi, leader of the congressional Democrats, said she would be willing to compromise with her Republican opponents.
Change (%)
FTSE 100
FTSE All-share
S&P 500
Dow Jones

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 01/10/2020.

21 August 2020
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Market Monitor – 21 August 2020

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Important information: Past performance is not a guide to future performance. Your capital is at risk. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back the amount invested. This document is not investment, legal, tax, or accounting advice. Investors should consult with their own professional advisors for advice on any investment, legal, tax, or accounting issues relating to an investment with Columbia Threadneedle Investments. The analysis included in this document has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. This document includes forward looking statements, including projections of future economic and financial conditions. None of Columbia Threadneedle Investments, its directors, officers or employees make any representation, warranty, guaranty, or other assurance that any of these forward-looking statements will prove to be accurate. Information obtained from external sources is believed to be reliable, but its accuracy or completeness cannot be guaranteed. Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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