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Please see below market update received from Brooks Macdonald this afternoon, which makes reference to ongoing Brexit negotiations and Pfizer’s upgraded vaccine efficiency rating. 

What has happened

The hangover from Monday’s market exuberance continued as rising US restrictions offset positive Pfizer news. The US closed down over 1% with technology marginally outperforming in line with previous COVID centric sell-offs.

Latest on the virus

Positively, the Pfizer efficacy rate was upgraded to 95% but more importantly the efficacy rate for those older than 65 is 94%. Given the over 65s are those most at risk of serious COVID complications it is undoubtedly the most important age group to defend through a vaccine. This was not enough to distract markets from the US new case growth which continues to rise. In New York City schools will now close as the city’s positivity rate of first time COVID tests is above 3%, the threshold previously set.  Colorado has urged residents to not travel around Thanksgiving and Minnesota has closed gyms, restaurants and bars. In Europe, numbers are showing signs of plateauing in some regions but France, one of the worst effected countries, looks likely to extend its lockdown due to end at the start of December. The main concern for markets is that relatively heavy restrictions (but ones that stop short of the actions in March/April) only seem to stabilise new cases rather than see them drop significantly. With winter coming this likely heralds an era of tougher restrictions interspersed with periods of loosening rather than the other way around.

EU Summit today

There was hope last week that today’s EU Leaders Summit may discuss a draft Brexit deal, but this has now been rolled into yet another week. On the agenda however will be the tough topics on the EU’s long-term budget and the recovery fund. We were reminded over the late summer that these topics weren’t exactly sorted when the vague ‘rule of law’ requirements led to a spat between some of the fiscal blocs within the EU. Indeed only this week, Hungary and Poland used their veto over conditions that would link access to budget funds to ‘adherence’ to the rule of law. Today’s meeting could therefore be a source of headlines even without a Brexit deal to deliberate.

What does Brooks Macdonald think

Whilst Brexit might not be on the agenda today, Sterling did falter overnight as the Times reported that EU leaders are asking the Commission to publish their no-deal contingency plans ahead of year end so businesses could prepare for that scenario. There is plenty of noise out there and expect some comments post today’s summit from the EU on the state of the talks but given the backlash against the hard line taken at the last meeting, expect calmer words this time.

We will provide further market analysis as the UK approaches its final week of Lockdown 2.0. Please check in again with us soon.

Stay safe.