Please find this week’s edition of Weekly Digest attached.
Last week saw a slight correction for the technology sector, with the technology-heavy NASDAQ index falling 3.3% over the course of the week, as it became known that the sector’s recent rise had been at least partly fuelled by heavy options buying by one player – the Japanese technology VC conglomerate Softbank. The risk-off turn of mood saw the VIX volatility index spike, rising above 30 for the first time since June. On a more positive note, last week’s employment report from the US saw non-farm payroll employment rising by 1.37 million in August, slightly better than consensus expectations. It is worth remembering that talks on extending fiscal support in the US remain deadlocked and Mitch McConnell, the Republican majority leader of the Senate, was clearly encouraged by these numbers and commented that they could not guarantee more stimulus.
The coronavirus continues its spread in Europe as “un-lockdowns” resulting in pulses of increased incidence (including the UK). Whilst a human tragedy, for investment markets, the mortality rates remain comparatively low and evidence suggests that modestly increased restrictions are effective. India is seeing a rapid rise in cases and has now become the second most infected country in the world after reporting over 90,000 infections in the last 24 hours. The global seven-day average number of infections has reached a record high, but recoveries are growing faster than new cases and deaths.
Brexit is returning to the headlines this week as the latest round of negotiations takes place. Reports suggest that the UK is seeking to roll back some of the terms in the withdrawal agreement, including on matters such as Northern Ireland. In terms of economic data this week, Tuesday sees the final Q2 GDP data for the Euro Area, followed by a meeting of the European Central Bank on Thursday. Friday sees the release of both European and US inflation data, along with UK GDP for July.