Last Week in the City: The end of the metropolis?

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 28 August.

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  1. Garry White

Global equities hit a record high this week. The FTSE All World index climbed above its previous high, set in February, as technology giants which have propelled US markets higher lifted the global benchmark to a new peak. The Federal Reserve announced a change in policy on inflation and employment, which means US interest rates are likely to stay lower for longer.

The future of city centres depends on people returning to their workplaces – and the UK government is now actively trying to get workers back at their desks. Highlighting the perilous situation faced by businesses reliant on people travelling to major conurbations, sandwich group Pret a Manager announced it was laying off a third of its workforce. 

The FTSE 100 traded little changed over the course of the week, with the FTSE 250 up 0.9% over the same period.

Do shares always win in the long run? It used to be a common belief of many managers that if you bought and held a portfolio of shares over any market cycle you would earn a decent return. This argument may be changing. Read more here.

Inheritance tax and intergenerational wealth – know where you stand: When looking at IHT mitigation, I think it is always important to know your current objectives and long term needs first, then address the tax implications afterwards. Emma Hammond explain all here.

Charles Stanley Radio

Listen to our Research team and Investment Managers discuss hot market topics.

Globalisation: The end of the party? Whilst the last century was defined by globalisation through global supply chains and cheaper trade, Garry White & Will Dobbs explore how both the Covid-19 pandemic and Brexit have and will affect globalisation. Listen here.

The Paradox of Inflation: In this episode, we are joined by Investment Managers from our Edinburgh office to discuss the mythical beast of inflation. Listen here.

Harlequins Mindfulness Series: In partnership with Harlequin FC, Luke Doherty, the team’s mindfulness coach, talks to us about the importance of mindfulness in both our professional and personal lives. Discover what he had to say here.

The radio page with all previous recordings can be found here.

Covid-19

People will be encouraged to go back to their offices and workplaces as part of a government campaign starting next week. Employers will be asked to reassure them that it is safe to return by highlighting measures being taken to prevent the spread of Covid-19. Business leaders have warned of damage being done to city centres as people stay away from offices. Reiterating this view, Dame Carolyn Fairbairn, the head of the Confederation of British Industry, said city centres could become "ghost towns" if the prime minister did not do more to encourage workers to go back to the office. She said allowing staff to work from home had helped keep companies afloat during the pandemic. But as offices stood empty, thousands of local businesses that relied on the passing trade were suffering, Dame Caroline added. Indeed, sandwich chain Pret a Manger said it would cut nearly 2,900 jobs, a third of its total workforce, after the desertion of high streets sent sales plummeting. We look at the implications of these changing work patterns on city centres here.

The European Commission made a €336m down payment to AstraZeneca to secure at least 300 million doses of its potential Covid-19 vaccine.

The US government will purchase 150 million rapid Covid-19 tests from Abbott Laboratories for about $750m. The portable antigen tests, which can deliver results within 15 minutes and will sell for $5, received emergency-use authorisation from the US Food and Drug Administration on Wednesday.

Economics

The US Federal Reserve announced a change in policies on inflation and unemployment. Chair Jerome Powell said the US central bank will allow both to run above target levels to support the economy. In practice, this means that the world’s most important central bank is less likely to raise interest rates when the economy is heating up. It will also be more tolerant of a booming jobs market, when it may once have feared this would stoke inflation.

Geopolitics

US and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal, which has seen China lagging on its obligations to buy American goods. This followed a telephone call between US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He – their first formal dialogue since early May.

Japanese Prime Minister Shinzo Abe announced his resignation for health reasons. “I needed to fight against the disease and be treated and I was not really in a perfect state in terms of the health condition,” Mr Abe said. “I would like to send my apologies to the people of Japan.”

El Al Airlines will fly Israel’s first flight to the United Arab Emirates by a commercial carrier on 31 August. The direct flight between Tel Aviv’s Ben Gurion Airport and the UAE’s political capital of Abu Dhabi is expected to carry an Israeli delegation and accompanying officials from the United States, which brokered a peace agreement between the two countries that was signed on 13 August.

Brexit

Brussels has made Brexit negotiations "unnecessarily difficult" by insisting that the UK signs up to state aid and fisheries rules, David Frost, the UK’s chief negotiator, warned. He said that “any further substantive work” was being delayed by Brussels’ creating roadblocks out of the two particular areas of concern. Mr Frost’s EU’s counterpart, Michel Barnier, accused the British Government of “wasting valuable time” in trade talks with the European Union.

Former Australian prime minister Tony Abbott is to be Britain's new joint president of the Board of Trade. Mr Abbott, who led Australia from 2013 to 2015, will be tasked with drumming up deals for the UK around the world. The Board of Trade’s mission is to “champion exports and inward and outward investment to deliver economic growth and prosperity”.

Technology

Facebook agreed to pay the French government €106m in back taxes to settle a dispute over revenues earned in the country. The payment covers the last decade of its French operations from 2009.

TikTok chief executive Kevin Mayer quit after just two months in the job ahead of an impending ban by US President Donald Trump. The Chinese-owned firm has been accused of being a threat to US national security by the Trump administration. Mr Mayer joined TikTok in June after leaving his role as Disney's head of streaming services. Meanwhile, TikTok called Mr Trump’s ban ‘political’ in lawsuit.

The US is now trying to kill Huawei completely, but if Washington succeeds in destroying one of China’s leading tech groups, Beijing may be forced to retaliate against US groups such as Apple. Garry White looks at the issue here.

Energy

Oil prices rose over the week on recovery hopes and after storm moved into the Gulf of Mexico. Brent crude futures rose 1.7% over the week to trade at about $45 a barrel.

Oil and gas exports from the US were severely disrupted by Hurricane Laura, with nearly a million barrels per day (bpd) of crude exports hit by closures of US Gulf Coast terminals and disruptions at ports.

Mining and commodities

The gold price hit a record high recently as investors decided the precious metal is a great safe haven in troubled times. But is it really money? We look at the arguments here.

Retail

Marks & Spencer will make the first deliveries through its new online food shopping joint venture with Ocado on Tuesday, which is a significant step in the company’s recovery plan. Previously, Ocado had a contract to deliver food supplied by Waitrose, owned by the John Lewis Partnership.  

Travel

The UK's travel industry has reached a "critical point" and is calling for further support to stem job losses. Measures to curb the pandemic have already led to the loss of around 39,000 jobs, travel industry trade body ABTA said. About 65% of travel companies have had to make redundancies or start a consultation. ABTA said the industry desperately needs "tailored support" or many more jobs would be lost.

Norwegian Air said it would need more cash to survive after sinking to a £450m half-year loss. "Norwegian is facing challenging times ahead," the airline said.

EU aviation regulators have scheduled flight tests for Boeing's troubled 737 Max aircraft. The European Union Aviation Safety Agency (EASA) said the tests would take place in Vancouver, Canada in the week beginning 7 September.

Flights within China should fully recover by the start of next month according to a global travel data company. Air travel has been picking up gradually since the coronavirus grounded the majority of planes in February. This month, domestic arrivals at Chinese airports reached 86% of 2019 levels according to figures from ForwardKeys.

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