Market Monitor – 25 September 2020

Market Monitor – 25 September 2020

Global stock markets have suffered a week of heavy losses as gloom relating to the Covid-19 pandemic and the political outlook on both sides of the Atlantic intensifies.With coronavirus infection levels returning to their spring highs in many parts of Europe and North America, concerns are growing about the reintroduction of the strict lockdown rules that came into force originally in March. And this week’s economic data suggests that many countries are struggling to maintain the growth they had shown earlier in the summer. While unimpressive jobs and output figures can sometimes be taken by investors as a sign that new central bank stimulus measures – which typically boost share prices – could be on their way, there was very little of this kind of optimism in evidence this week.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 3% down for the week so far, with the S&P 500 losing 2.2% in the same period. US investors are focused on two things at the moment – the pandemic and November’s presidential election. Unfortunately, sentiment relating to both has been largely negative in the past few days.A number of American states are showing little sign of getting on top of infection levels, raising the prospect of more draconian lockdown measures being brought back in the near future. Meanwhile, President Trump has stoked fears that the outcome of the election could be contested and subject to drawn-out legal challenges – as was the case in the George W Bush/Al Gore election 20 years ago. Most alarmingly, Trump has even suggested that any transition of power might not be peaceful – a statement that Republican leaders have attempted to downplay. For investors, there are also short-term concerns that the Fed may not introduce any further stimulus measures until the election on November 3 at least.

The UK and Europe

In Europe, the leading indices followed Wall Street into the red. In the UK, the FTSE 100 ended Thursday 3.1% down for the week after prime minster Boris Johnson announced a new wave of restrictions focusing largely on the hospitality sector in response to the surging number of Covid-19 cases in Britain. Hotel and restaurant chain Whitbread announced on Tuesday it was cutting as many as 6,000 jobs.Ongoing Brexit worries – with reports this week suggesting that border issues following the end of the transition period on December 31 could lead to 7,000-strong truck tailbacks at Kent’s ports – have driven the pound lower and knocked confidence. Meanwhile, news that the government was planning to introduce new job-support measures did little to cheer the stock market or sterling.In Germany, the DAX index ended Thursday’s session down 3.9% for the week, while France’s CAC 40 lost 4.3%. Both countries reported downbeat economic data this week, with French business activity falling to a four-month low after a surge in Covid-19 cases.Consumer confidence in Germany is still weak, while the country’s service sector output has declined in September – although the German manufacturing sector continues to grow.
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.

25 September 2020
Mark King
Head of Investment Content
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Market Monitor – 25 September 2020

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