Market Monitor – 23 October 2020
Insights

Market Monitor – 23 October 2020

Optimism about the ability of major western nations to bounce back quickly from the coronavirus pandemic was in short supply this week as concerns about a second wave of Covid-19 grew.

Global stock markets have extended their recent losses this week, with the second wave of Covid-19 taking an increasingly heavy toll on economies around the world. While the resurgence of the coronavirus in Europe and North America in particular is likely to lead eventually to additional stimulus measures from central banks, markets have again been disappointed by the continued failure of politicians in the United States to agree a new rescue package. The picture has not been entirely gloomy, however: there has been some positive economic news this week, with China becoming the first major economy to return to its pre-pandemic size – although third-quarter GDP figures came in somewhat short of expectations. Meanwhile, in the US, job losses appear to be slowing with the number of new unemployment claims this week falling to its lowest level since the start of the global health crisis. On the vaccine front, two of the major trials in the UK and US appear to be close to gaining regulatory approval. But investors remain aware that even if an effective vaccine becomes available before the end of 2020, the crisis is likely to continue for many months as a global inoculation programme is rolled out.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.8% down for the week so far, with the S&P 500 lower by 0.9% during the same time. Once again, stimulus talks between the Trump administration and the Democrat-led Congress have been investors’ main focus, with time running out for a deal to be agreed ahead of the presidential election at the start of November. Donald Trump appeared to reverse his recent position by calling for a bigger aid package but Republicans in Washington remain reluctant to approve such a large increase in spending. Meanwhile, coronavirus infection rates across the US are again on the up, raising fears that tougher lockdown policies could be imposed on a state-by-state basis.

The UK and Europe

In the UK, the FTSE 100 has endured another dismal few days, ending Thursday 2.3% down for the week – and dropping to its lowest level since the first half of May in the process. Shares in London are fighting on a number of fronts at the moment: as well as a rise in coronavirus cases and the introduction of strict new local lockdown rules around the country, the UK government is running out of time to agree a new trade deal with their counterparts in the European Union. Talks have now resumed after last week’s impasse, but businesses are increasingly resigned to facing a period of uncertainty – whether or not a deal is reached – after the implementation period ends on 31 December. There was some good news on Thursday, however, when chancellor Rishi Sunak announced improvements to the Job Support Scheme, which is due to come into effect at the start of November. The extra government subsidies for employers are designed to reduce the number of redundancies in the UK over the course of the winter, and were welcomed in particular by the more domestically focused FTSE 250 index. In Frankfurt, the DAX index ended Thursday’s session down 2.8% for the week as Covid-19 infection rates in Germany continued to rise, while France’s CAC 40 lost 1.7%. The International Monetary Fund this week warned central bankers in the eurozone that further stimulus measures would be needed if Europe’s major economies are to avoid a double-dip recession.
16/10/2020
22/10/2020
Change (%)
FTSE 100
5919.6
5785.7
-2.3
FTSE All-share
3325.7
3268.5
-1.7
S&P 500
3483.8
3453.5
-0.9
Dow Jones
28606.3
28363.7
-0.8
DAX
12909.0
12543.1
-2.8
CAC-40
4935.9
4851.4
-1.7
ACWI
583.1
579.9
-0.5

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 22/10/2020.

23 October 2020
Mark King
Head of Investment Content
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Market Monitor – 23 October 2020

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