Please see below ‘Markets in a Minute’ update received from Brewin Dolphin yesterday evening, which focuses on Brexit as well as the effects of Donald Trump’s positive Covid-19 test result on the markets.
Global share markets mostly rose over the last week as hopes increased that Democrats and Republicans will agree a new stimulus deal to keep the US recovery on track. However, some of those gains were lost on Friday as markets fell on the news that President Trump had tested positive for Covid-19. The S&P500 fell by 1% on Friday, while the tech-heavy Nasdaq dropped by 2.2%. The news had less impact on the UK market where the FTSE100 closed up by 0.4%.
Last week’s markets performance*
- FTSE100: +1%
- S&P500: +1.5%
- Dow: +1.87%
- Nasdaq: +1.47%
- Dax: +1.76%
- Hang Seng: 0.96%**
- Shanghai Composite: -0.04%***
- Nikkei: -0.75%
*Data for the week to close of business, Friday 02 October.
**Market closed for holiday from close of business Wednesday 30 September until Monday 5 October.
***Market closed for holiday from close of business Wednesday 30 September until Friday 9 October.
Shares start week with gains on Trump prognosis
Global equities rose yesterday on news that Donald Trump was likely to be discharged from hospital. The S&P500 closed up by 1.8%, the Dow gained 1.68% and the Nasdaq rose by 2.32%. In London, the FTSE100 gained 0.7% to close at 5,942.94.
In Europe, the benchmark Eurostoxx600 gained 0.81% and the German Dax closed up by 1.1%.
Donald Trump left hospital on Monday evening, telling Americans: “One thing that’s for certain – don’t let it dominate you, don’t be afraid of it,” even as his doctors warned that he was “not out of the woods” and could still be infectious.
Covid-19 resurgence; lockdowns increasing
Reports last week that the infection rate in the UK was falling appear to have been premature. The government has blamed an “IT issue” for failing to capture 15,841 infections that should have been added to the test and trace system.
The cases occurred between 25 September and 2 October. When incorporated into the published data, they reverse the trend of flat to falling infections and instead show cases in the UK continuing to rise, with the North of England and the Midlands worst affected, although London too is trending up. That can only increase the risk of more local lockdowns. On that note, a leak to the Guardian newspaper revealed a three-step government plan to reimpose tough restrictions if cases keep rising.
Some of the measures being considered are:
- Closure of hospitality and leisure businesses.
- No social contact outside your household in any setting.
- Restrictions on overnight stays away from home.
- No organised non-professional sports permitted or other communal hobby groups and activities, such as social clubs in community centres.
Numerous other countries are battling localised outbreaks with new containment measures. All bars have been ordered to close in Paris for two weeks from today (Tuesday) after the French government raised the city’s virus alert to maximum following a sustained rise in infections. Gyms and swimming pools will also be ordered to shut. In New York, schools and non-essential businesses have been ordered to close in a number of postcodes where cases have risen sharply. Over the weekend, residents of Madrid and nine towns in the regions entered a partial lockdownwhere they can’t leave their localities except for school, work or medical reasons.
Brexit and the pound
Sterling has been trending up on hopes that progress in Brexit talks will be enough for bureaucrats to enter the so-called “tunnel” (the media blackout period in which the detail of any high level deal gets worked out). That optimism proved well-founded as prime minister Boris Johnson met European Commission president Ursula von der Leyen on Saturday, and both agreed to work together to help resolve the final sticking points, mainly around state aid, dispute mechanisms and fishing rights. Negotiations are now entering an “intensified” phase and EU leaders will evaluate the progress at a summit on 15-16 October.
Housing
We have seen a strong performance in the UK housing market since Rishi Sunak announced a stamp-duty holiday until next year. Working from home has given many potential buyers more freedom about where they live. A survey last week from Nationwide showed prices rising at their fastest annual pace for four years.
As we have discussed before, the pandemic has given people genuine reasons to want to move, but lack of job security in the face of rising unemployment seems to be causing many to hold off, particularly younger buyers.
Mortgage conditions are also starting to tighten in the UK for higher loan-to-value home loans. So, the cut in stamp duty seems destined to help the better-off to further improve their quality of life, but will do less to help first-time buyers on to the property ladder.
Employment
The employment market has on paper held up well due to the furlough program, but is set to get worse. Even with the furlough scheme, unemployment claims have increased by more than double the amount that took place during the financial crisis and as the furlough scheme winds down there is expected to be a further rise in the unemployment rate.
In the US, the employment data had been encouraging last week, with the ADP survey showing more jobs have been created. The Institute of Supply Management survey of the manufacturing sector also showed an improvement in its employment category.
Initial and continuing unemployment as measured by the US Labor Dept also improved. However, while the key non-farm payrolls report in the US did show the economy had created 661,000 new jobs in September, the figure was less than had been hoped for.
The most alarming feature of the report was the growing numbers of permanent job losses, which are now rising faster than they were during 2008.
Although the overall unemployment rate declined, this reflected people leaving the workforce – either retiring or giving up looking for work – rather than them finding jobs.
Communication has never been more important in the ever-changing world we live in. Please check in with us soon for further updates on world-wide events and the markets.
Stay safe.
Chloe