Last Week in the City: Trump diagnosis hits market confidence

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 2 October.

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  1. Garry White

US markets looked set to fall sharply at Friday’s open after President Donald Trump revealed he and the first lady had tested positive for Covid-19. Mr Trump and Melania are now in quarantine.

The news came in the final weeks before the Presidential election on 2 November, in which the two candidates – Mr Trump and Joe Biden – have such divergent policies it makes it a significant vote for investors.

The US also failed to agree on a new Covid-19 stimulus package – and concerns about a second wave of the virus this winter continues to dog economic expectations. The US-China tech war escalated, with the US targeting China’s most significant semiconductor company. The UK and EU finished their last round of formal talks before the end of the transition period at the end of this year. There appear to be many sticking points on the route to an agreement.

The FTSE 100 was little changed over the course of the week by mid-session on Friday, with the FTSE 250 up 1.2% over the same period.

Charles Stanley’s Investment Strategy Committee met this week – you can read its conclusions in this week's article, Charles Stanley investment strategy update.

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Charles Stanley Radio

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

There was a 61% increase in positive Covid-19 cases in England's latest weekly data, with more than four times the number of cases recorded as there were at the end of August, the health service's test and trace scheme said on Friday.

The number of new Covid-19 cases in the United States has risen for two weeks in a row in 27 out of 50 states, with North Carolina and New Mexico both reporting increases above 50% last week.

A new global laboratory network will compare Covid-19 vaccines head-to-head. The Coalition for Epidemic Preparedness Innovations will assess data from potential inoculations, allowing scientists and pharmaceutical groups to compare them – and hopefully speed up the selection of the most effective shots.

The House of Representatives approved a $2.2 trillion coronavirus stimulus proposal put forward by House Democrats – but no bipartisan deal has been agreed. Democrats control the House, with the vote split along party lines. Any agreement seems distant at this time.

World Bank President David Malpass said he is seeking board approval for a $12bn Covid-19 vaccine financing plan to help poor and developing countries secure a sufficient share of vaccine doses when they become available.

Clinical trials of AstraZeneca and Oxford University's experimental vaccine have resumed in Japan, almost a month after being put on hold due to an illness of a British volunteer. The trial in the US, however, remains on hold.

Prime Minister Boris Johnson's government is seeking to avoid a full national lockdown to prevent unemployment soaring into the millions, Environment Secretary George Eustice said. The Office for Budget Responsibility forecast in July that unemployment would peak at 11.9% in the final quarter of 2020 under its central economic scenario, equivalent to just over 4 million people, before averaging 3.5 million in 2021. In a more negative scenario, unemployment would average 4 million through 2021.

The second wave of the novel coronavirus has arrived in the UK and mainland Europe. We look at what could happen next in this week's article, How will the Covid-19 crisis conclude?

Economics

The UK suffered a record collapse in economic output in the second quarter of 2020 when Covid-19 lockdown measures were in full force, though the decline was slightly smaller than first estimated. Gross domestic product shrank by 19.8% in the three months to June, the Office for National Statistics said, slightly less than the initial estimate of a quarterly 20.4% crash but still more than for any other major advanced economy.

Geopolitics

President Xi Jinping’s recent statement that China will aim to be at ‘net zero’ on carbon dioxide emissions by 2060 could be a big game-changer. It could also just be an intervention in the US election. We look at whether China is playing geopolitics with renewable energy policy in this week's article, Is China playing geopolitics with its green policy?

When Donald Trump launched the Unites States Space Force at the end of last year there was much sniggering and derision from his critics. They won’t be laughing soon. Garry White looks at the race for the riches of space in this week's article, The Earthly battle for the riches of space.

Brexit

Prime Minister Boris Johnson will speak to the president of the EU Commission Ursula von der Leyen to "take stock" of post-Brexit trade negotiations and "discuss next steps". The UK and the EU held their final formal rounds of trade talks in Brussels last week. Both sides have said a deal needs to be agreed this month to take over from the transition period at the start of 2021.

The flow of financial services between the European Union and Britain will be less fluid from January whatever happens in talks on a future free trade deal, the EU's financial services chief designate Mairead McGuinness told the European Parliament. "Under all circumstances, deal or no deal, trading in financial services will be different and less fluid as of the first of January next year," Ms McGuinness said.

Technology

After its successful targeting of Huawei, which has led to many western governments vowing not to use the Chinese networking group’s products in 5G communications systems, Semiconductor Manufacturing International Corporation (SMIC) is the next target for US hawks. A leaked letter sent to US corporate executives told them they now needed a licence to deal with SMIC.  This prompted a furious editorial on Communist Party mouthpiece the Global Times. “From Huawei to SMIC, the Chinese people should see for themselves that we are facing a protracted battle against high-tech suppression being led by the US,” the editorial said. “This is almost the key process for the great rejuvenation of the Chinese nation.” Garry White looks at the East-West battle to be the leader in the semiconductor industry and its significant geopolitical implications in the article, China plans to pull further ahead of the US in 5G.

Energy

Oil prices fell over the week, with a sharp fall after Mr Trump’s Covid-19 diagnosis was announced. Brent crude future was down 6.4% over the week by mid-session on Friday, trading at about $39.30 a barrel.

Retail

Walmart agreed to sell its UK supermarket chain Asda to private equity group TDR Capital and the founders of petrol station operator EG Group for £6.8bn. The US group paid £6.7bn for the grocer in 1999.

The market value of online grocer Ocado has overtaken Tesco briefly this week, despite having only a small fraction of the UK grocery market share. The rising popularity of online food shopping and Ocado's new tie-up with Marks & Spencer has been regarded positively by investors.

Media

Playboy Enterprises is going to list again on the stock market, nine years after it was taken private. The empire built up by the late Hugh Hefner is merging with another company, Mountain Crest, in a deal that values Playboy at $381m, including $142m of debt. Playboy now describes itself as a consumer products company.

Transport

With Congress failing to agree on a new stimulus package, US airlines started laying off thousands of workers. American Airlines says it was making 19,000 workers redundant and United Airlines 13,000. The carriers said they were ready to reverse the decisions if more financing is found, despite already receiving billions of dollars from the federal government.

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