Last Week in the City: Trump’s election mischief continues

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 20 November.

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  1. Garry White

Donald Trump isn’t going without a fight. Legal challenges continue, with little evidence emerging to suggest that voter fraud occurred on the scale claimed by Republicans. Nevertheless, it is almost certain that Joe Biden will occupy the Oval Office from January next year.

Markets were upbeat – with equities and the oil price rising – as hopes gathered pace that a vaccine will be available relatively soon. However, there will be significant logistical challenges in vaccine distribution and the US, UK and Europe are expected to see a spike in infections in the winter, with more economically-damaging lockdowns possible.

The FTSE 100 rose 0.2% over the week by mid-session on Friday. The FTSE 250 added 1.1%.

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Investing with a conscience: Covid-19 has increased the focus on Environmental, Social and Governance (ESG) investing. Mark Feely explains why here.

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Covid-19

There was more positive news this week in the race to develop a Covid-19 vaccine. Oxford University confirmed the vaccine it is developing with AstraZeneca produced strong immune responses in older adults. Production of Moderna’s vaccine is already gearing up, with European output set to start by the end of the month.

News of scientific breakthroughs in the quest for a Covid-19 vaccine are welcome. But, economically, what exactly will the vaccine change? We take a look here.

Nevertheless, the number of infections continue to rise – increasing the likelihood of further economically damaging lockdown measures.  

  • More than 250,000 people have now died of Covid-19 in the US, with the daily count of new coronavirus cases running at close to 160,000 on average – a jump of 80% in the last two weeks.
  • A "tough" six months lies ahead for Europe, which is again the epicentre of the coronavirus pandemic, the World Health Organization (WHO) warned. The continent recorded more than 29,000 new Covid-19 deaths last week – but new cases are declining as lockdowns curb infections.
  • Russia recorded it worst daily caseload increase, with 24,318 new infections on Friday.
  • The rate of coronavirus infections across England and Wales appears to be slowing down, new data suggests.

The International Monetary Fund (IMF) and the Group of 20 (G20) warned that the recovery from the pandemic-induced recession was at risk and could be derailed by the resurgence of Covid-19. This may result in fresh social-distancing restrictions on households and companies. The IMF noted the progress on producing a vaccine – but also warned that elevated asset prices pointed to a disconnect from the real economy and argued that this was a potential threat to financial stability. “The recovery is uneven, highly uncertain and subject to elevated downside risks, including those arising from renewed virus outbreaks in some economies,” the G20 said, ahead of their online summit this weekend.

The G20 world leaders will discuss three main themes. We look at what the summit is trying to achieve here.

US election

Donald Trump is still acting as if Joe Biden will never take his seat in the Oval Office. However, it appears almost certain that we are in the final few weeks of the former reality TV star’s time as President of the United States of America.

Aides to the president have reportedly completed a 2022 budget, despite the very low probability it will be implemented. Business groups including the US Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable urged the Trump administration to cooperate with the transition to a Joe Biden presidency.

However, back in the real world, things were not looking great for Mr Trump. US President-elect Joe Biden's victory in Georgia was confirmed by a recount. Trump campaign senior legal adviser Jenna Ellis said the audit had gone "exactly as we expected" because the state had recounted illegal ballots. Ms Ellis made the comments without presenting any evidence of illegal ballots.

Mr Biden said the Trump administration’s refusal to give his team access to key federal agencies was affecting its ability to create guidance for the “all-important issue of vaccine distribution”. Infections are on the rise in all 50 states and deaths are averaging more than 1,155 per day – the highest in months.

Economics

British government borrowing in October hit a record level for the month, as the UK continued heavy spending to support the economy during the pandemic. October borrowing hit £22.3bn, the highest figure for that month since records began in 1993. Since the beginning of the financial year in April, government borrowing has reached £214.9bn, £169.1bn more than a year ago. The independent Office for Budget Responsibility (OBR) has estimated it could reach £372.2bn by the end of the financial year in March.

Britain is on course for a double-dip recession, as renewed lockdown measures to try and quell a second wave of the pandemic deliver another blow to economic activity, a Reuters poll of economists found.

UK consumer confidence sank to a six-month low in November as a second Covid-19 lockdown prompted a surge in pessimism over households’ finances. The consumer confidence index from market research firm GfK fell to -33 from -31 in October – although this was slightly better than the consensus view of -34. The survey’s gauge of personal finances over the last year slid to its lowest level since December 2013.

Geopolitics

Changes in the way capitalism operates are being driven by the success of China’s state-directed economy. This means Britain’s new foreign takeover law is long overdue. Garry White looks at the issue here.

Chinese state-backed media says Beijing is preparing for a “final act of madness” by Donald Trump. The tabloid Global Times, an unofficial English-language propaganda arm of the Chinese Communist Party, said it is highly likely that the incumbent US president will take much more extreme measures on issues such as the South China Sea, the island of Taiwan and China's high tech sector in the coming weeks. The moves are also seen as "setting obstacles" for Joe Biden in his foreign policies. To read the article click here.

A Canadian court will hear evidence from additional police witnesses before it makes a ruling in the case to extradite Meng Wanzhou, the chief financial officer of Chinese telecoms giant Huawei, to the US. Ms Meng Wanzhou was arrested two years ago at Vancouver International Airport on charges of bank fraud because she allegedly misrepresented Huawei’s dealings with Iran, putting one of its lenders, HSBC, at risk of violating US trade sanctions. She has denied the charges.

Washington and the West’s media are distracted by the twists and turns of the legal challenges to the US election result launched by Donald Trump. China is using this opportunity to bury ‘bad news’. We look at China’s actions whilst the world is distracted here.

Technology

Nvidia confirmed Fortnite is coming back to iPhones through its cloud gaming service, despite Apple having thrown the game off its App Store. The company's GeForce Now service is now available through the Safari web browser – and it bypasses the App Store entirely. Apple banned Fortnite from its services amid a continuing legal battle with the game's owner, Epic Games over Apple’s fees.

Energy

Oil prices rose for the third week in a row on hopes that progress on developing a vaccine would boost demand for energy. Brent crude futures bounced by almost 5% over the week to trade at about $44.70 a barrel by mid-session on Friday.

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