Please find this week’s edition of Weekly Digest attached.
Last week saw global equities rise by 1.6% in US Dollars, however, with sterling falling 1.5%, UK investors saw almost no change to global equity portfolio values. The VIX volatility index rose by one point and gold rose 2% after a couple of weeks of downwards drift. Oil fell by 8% and back below the $40 mark, although the politics of supply are driving the price more than the dynamics of demand. After Donald Trump’s COVID-19 diagnosis was revealed overnight on Thursday, Friday ended up being relatively calm. European markets stabilised and ended little changed, whilst US shares closed down only 1%. The key economic data was the US monthly employment report, which saw the unemployment rate decline to under 8%, slightly better than forecast. There was no progress made on US fiscal spending, though Steve Mnuchin and Donald Trump reportedly want to try and reach a compromise with Democrats around a $1.5 trillion package.
On the subject of the US election, the first Presidential Debate took place last week. The debate was an unedifying spectacle, but Donald Trump’s aggressiveness appears to have influenced the polls more favourably towards Joe Biden. With no realistic likelihood that the election will be postponed (it would take congressional agreement to do so and it is unlikely that the split congress could agree), the Vice Presidential debate on Wednesday of this week (7th) takes on more significance.
Turning to COVID, headlines and reported numbers both confirm that the battle to control the virus is still some way from being won. The UK is now a hotspot, as one of the three countries with the highest growth rate of new infections globally (Russia, the Netherlands and the UK are all seeing 30% new case growth). The UK now has close to 1/3 of country on heightened restrictions whilst, in New York, nine neighbourhoods have been instructed to close schools and restaurants. From an economic perspective, however, these lock-downs are far less onerous than the widespread (global), simultaneous and extreme restrictions that occurred in the immediate wake of the outbreak of the virus. We would encourage COVID watchers to study the growth rate of recoveries and the number of active cases. When active cases decline materially and consistently, the battle will be won. Currently “active cases” are growing at around 3.6% week on week, broadly in-line with the past month.
News over the weekend and yesterday suggests Donald Trump is progressing well with his COVID treatment. In the UK, the news that intensified Brexit talks have been agreed by Ursula Von Der Leyden and Boris Johnson suggests an end-game may be close. State Aid and fishing rights appear to be the outstanding issues. The European Council is scheduled to consider the progress of Brexit talks next week and Michael Barnier reportedly indicated that a deal by the end of month is a possible target.
Corporate news this week is scant, with M&A and COVID-layoffs being competing themes. The notable items are Cineworld closing its doors in the UK and the US, DPD recruiting aggressively, and a possible competing bid for William Hill from Betfair. Wednesday’s Vice Presidential debate will be the key focus this week and we will have the latest minutes from the recent Federal Reserve meeting on the same day, following by minutes from the Europe Central Bank on Thursday. This week also sees the release of the final readings of global PMIs (Composite, Manufacturing and Services Sector).