Please see below this week’s market commentary update article from Brooks Macdonald, received 02/11/2020.
Weekly Market Commentary | Tuesday’s US election day key focus for markets this week
02 November 2020
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By Matthew Cady
Global equity markets suffer their worst week since March, as a coronavirus second wave threatens the pace of economic recovery
UK Prime Minister Boris Johnson signals a move back into lockdown for England from Thursday, but the Furlough Scheme is extended
The US election on Tuesday is the highlight for the week, but markets will also be watching policy decisions due from US and UK central banks
Global equity markets suffer their worst week since March, as a coronavirus second wave threatens the pace of economic recovery
Global equity markets fell -1.2% on Friday, finishing the week down -5.3%, and suffering their worst week since March (MSCI ACWI net total return in US dollar currency terms, MSCI: please see important information). Gripping the markets’ risk-off mood was concern about the economic impact from a rising second wave of coronavirus infections. Ending the month on a sombre note, the US set a record for daily new cases on Friday with almost 100,000 people testing positive according to the US CDC1, and a new one-day country world record for the pandemic. Globally, the US continues to lead with over nine million cases2, but COVID-19 is seeing a resurgence across other countries, including UK and Continental Europe.
UK Prime Minister Boris Johnson signals a move back into lockdown for England from Thursday, but the Furlough Scheme is extended
Over the weekend, England announced a return to a national lockdown, joining similar measures taken in France and Germany in recent days. England will start a new country-wide lockdown on 5 November, lasting four weeks until 2 December, although lockdown 2.0 will be somewhat different with schools and universities remaining open. The UK Prime Minister also indicated that the Furlough Scheme, which was due to be replaced at the end of October, would instead be extended at 80% of hours not worked, and would last for the period of the new lockdown.
The US election on Tuesday is the highlight for the week, but markets will also be watching policy decisions due from US and UK central banks
This week, the long wait is over. Tuesday 3 November is US election day, but that date is less significant this year, as record numbers of US citizens have already chosen to vote early either in person or by post. According to the US Elections Project as of 1 November, some 92 million Americans (equivalent to 66.8% of the total votes counted in the 2016 US election) have already cast their ballots3. According to Reuters, only 47 million votes came before Election Day in 20164. In addition, some states are allowing the counting of late postal ballots, for example, by three days and nine days after election day respectively in the case of swing states Pennsylvania and North Carolina. Normally, a state requires ballots to arrive on election day in order to count but, following legal rulings, this time for some states it means that ballots need only be postmarked by election day or the day before and can still be counted if they arrive within the allotted time after election day. This suggests that for a very close-run result in some states, postal votes might be the deciding factor and counting those in the days following 3 November could well leave markets unsettled.
While the US election is the main event of the week, markets will still have plenty on their plate on the data front. The week starts with final October purchasing manager surveys for manufacturing around the world, before getting services and composite surveys later in the week. The week will end with US October payrolls and unemployment data on Friday, and while consensus is looking for another fall in the US unemployment rate to 7.7% in October (from 7.9% in September5), the focus will be on any clues about the pace of change behind the headlines. If that wasn’t enough, it’s another big week for corporate earnings, with a host of companies reporting Q3 results through the week including AstraZeneca, the company behind one of the hoped-for COVID-19 vaccines, due on Thursday. Finally, UK-EU trade discussions continue this week, and news here could surprise either way. With markets having been on the back foot in recent sessions, it means the pressure-release valve button for this week is back with the US Federal Reserve who will announce their latest policy decisions this week on Thursday. Closer to home, the UK Bank of England’s Monetary Policy Committee also announces its latest policy decisions on Thursday and following the latest UK lockdown measures and extension to the Furlough Scheme, markets will be expecting policy coordination to be delivered.
A useful article from Brooks Macdonald, focusing on the UK national lockdown and the US election. The US is one of the most influential markets globally, what happens next from a political point of view is important to the global economy.
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Charlotte Ennis
03/11/2020