Last Week in the City: Resurgent infections threaten recovery

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 25 September.

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  1. Garry White

Concern was building amongst investors this week as they grappled with the implications of a fresh wave of Covid-19 cases in the US, mainland Europe and the UK. The US has now recorded one-fifth of all infections of the virus globally.

The number of people in England with Covid-19 jumped by 73% in the week to 19 September, according to an official sampling estimate from The Office for National Statistics. It said around 103,600 people in England had the disease during that week – equivalent to 1 in 500 people. This was up from 59,800 in its estimate for the previous week, highlighting the resurgence of the pandemic in Britain.

New York retained the top spot in a survey of global financial centres, with London strengthening its position in second place just a few months before Britain’s full departure from the European Union. The assessments look at political stability, regulatory environment, availability of skilled staff, quality of life, infrastructure, availability of capital, market liquidity, reputation and cultural diversity.

The world’s super-rich also keeps getting wealthier. It was calculated that America’s billionaires added around a third to their wealth during the Covid-19 crisis. In Asia, Zhong Shanshan, founder of the Chinese bottled-water brand Nongfu Spring, overtook Alibaba founder Jack Ma to become China’s wealthiest person after his company went public earlier this month with a blockbuster listing in Hong Kong.

The FTSE 100 was down 0.1% over the course of the week by mid-session on Friday, with the FTSE 250 down 0.2% over the same period. Why can’t I retire at 60? The truth about saving for your pension.

 

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

The outlook for sterling: In this episode, we discuss factors which affect the value of the great British pound.

The US presidential election: What does it mean for markets? In this episode, we discuss the upcoming US presidential election and the impact this will have for investors.

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.

Covid-19

US President Donald Trump told the United Nations General Assembly that China must be held accountable for having “unleashed” Covid-19 on the world, prompting Beijing to accuse him of “lies” and abusing the UN platform to provoke confrontation. However, China’s President Xi Jinping struck a conciliatory tone in his pre-recorded address, calling for enhanced cooperation over the pandemic and stressing that China had no intention of fighting “either a Cold War or a hot war with any country”.

Is the second wave of the Covid-19 virus upon us? The latest pandemic figures from the World Health Organisation (WHO) and on the global tracking websites do not make good reading. There will be more economic consequences ahead. We look at the increase in this week's article, The virus has a second wind.

Britain recorded its highest number of daily cases of Covid-19 on Thursday at 6,634, reflecting a second wave of infections sweeping through the country – but also a much higher level of testing than during the first wave.

The number of Covid-19 cases in the US topped 7 million on Thursday – more than 20% of the world's total – as Midwest states reported spikes in infections in September.

However, Australia's infection hotspot of Victoria looks set to lift some tough lockdown restrictions in coming days, after reporting only 14 new cases and eight deaths in the last 24 hours on Friday.

AstraZeneca is still waiting for the US drug regulator to approve the restart of the clinical trial of its potential Covid-19 vaccine in the US almost three weeks after it was paused due to safety concerns. The US trial of AstraZeneca's Covid-19 vaccine candidate, initially developed by the University of Oxford, remains on hold while regulators investigate an illness in one of the participants.  A British study and other programmes outside of the US have resumed.

After tighter rules were announced in the UK because of rising inflections, grocer Tesco introduced limits to stop customers bulk-buying key products such as flour, pasta, toilet roll and anti-bacterial wipes. Customers stockpiled key goods at the start of the coronavirus pandemic lockdown in March, stripping some shelves bare. "We have good availability, with plenty of stock to go around, and we would encourage our customers to shop as normal," a Tesco spokeswoman said.

An experimental Covid-19 vaccine developed by China's Clover Biopharmaceuticals appeared to be safe and able to trigger immune responses in animal tests, the researchers said.

UK Chancellor Rishi Sunak announced a new wage subsidy scheme that will support “viable jobs” and see the government top-up the wages of employees who can work at least one third of their usual hours. The Chancellor said the scheme will begin in November and last six months. It is less generous than the furlough scheme, which has now ended.

Covid-19 and the Japanese model: Japan decided on a middle course in its response to the Covid-19 pandemic, which was relatively successful. People took it upon themselves to behave responsibly. We look at the response in this week's article, Covid-19 and the Japanese model.

Economics

The UK government borrowed £35.9bn in August as tackling the economic fallout from the pandemic took its toll on the public finances. The difference between spending and tax income was £30.5bn more than it borrowed in August last year. The increase meant that the borrowing figure hit its highest amount for August since records began in 1993.

The number of Americans making new claims for unemployment benefits rose slightly last week amid worrying signs that the economic recovery was stalling. There were 870,000 jobless claims last week, up from 866,000 for the week ending 12 September, according to figures from the US Labor Department. The rise came as a shock to economists, who had forecast a fall to 840,000 benefit claims.

Geopolitics

Major trade-war victim Huawei said it had to rush to stockpile chips ahead of the latest tightening of trade restrictions from Washington, which has hit its supply hard. "Non-stop aggression from the US government has put us under significant pressure," Guo Ping, who chairs the company, said. "Right now, survival is the goal." The company urged the US to reconsider the rules, which make it difficult for Huawei to buy essential parts for products such as phones.

Major carmakers are suing the US government over import taxes it has imposed on Chinese parts as part of the trade war. Tesla is the latest auto group to object to customs duties introduced by the Trump administration and is demanding refunds. The US and China have imposed border taxes on each other's goods and services as part of the ongoing trade dispute.

Brexit

France dismissed dire British warnings about post-Brexit transport delays across the Channel as “tactical posturing” and warned that the EU would not yield to ‘intimidation’ to reach an agreement on the future relationship between the two sides.

Shoppers will feel the impact of a no-deal Brexit at supermarket tills, the British Retail Consortium (BRC) warned. The BRC said tariffs would add £3.1bn a year to the cost of importing food and drink unless the UK and EU can strike a free trade agreement. "If there is no deal before Christmas, the increase in tariffs will leave retailers with nowhere to go other than to raise the price of food," it said. The government said it was "working hard" to reach a deal.

Technology

Tiktok submitted a request to block President Trump’s plans to ban downloads of the video platform from US app stores on Sunday. The request, filed in a Washington district court on Thursday, marks the latest attempt by the Chinese social-media company to protect its service in the US in the face of a potential ban.

Robot brains will fight the machine wars of the future. The US and its allies are starting to talk about the implications of using artificial intelligence (AI) in military systems. It is clear the rise of the machines needs to be controlled. Garry White looks at the nexus of technology and warfare in this week's article, Robot brains will fight the machine wars of the future.

Several major developers have formed a coalition to fight Apple over its app-store policies. The Coalition for App Fairness counts Spotify, Epic Games and Tinder owner Match Group among its founding members. It claims Apple "taxes consumers and crushes innovation", criticising what it calls anti-competitive policies. Apple, which is embroiled in legal action with some of the members, has long denied these accusations. Google, which runs the Play app store on Android, is not mentioned in the group's launch statement but is named elsewhere on its website and accused of similar policies.

Energy

The Covid-19 infection has accelerated the world’s move to green energy. To aid the economic recovery, subsidies, taxes and regulations will direct investors to commit much more to green outcomes. We look are the evolving energy revolution in this week's article, The Green Revolution will shake sectors and markets.

Brent crude prices rose 1.7% over the week to trade at about $42.55 a barrel mid-session on Friday, despite mounting worries about the impact on fuel demand of a widespread resurgence in Covid-19 infections.

Financials

HSBC's share price fell to its lowest level since 1995 amid allegations of money laundering. In 2013 and 2014 the bank allowed fraudsters to transfer millions of dollars around the world even after it had learned of their scam, leaked secret files show. HSBC says it has always met its legal duties on reporting such activity. Shares in rival banks named in the papers also fell. These included Standard Chartered, Barclays and Deutsche Bank.

Retail

Lord Wolfson, who runs clothing group Next, said that hundreds-of-thousands of traditional retail jobs may not survive in the wake of the Covid-19 crisis. He said many jobs are now "unviable" because the lockdown had triggered a permanent shift to online shopping. "I wouldn't want to underestimate the difficulty that is going to cause a lot of people who work in retail, I think it's going to be very uncomfortable," he said.

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