Please find the latest edition of Weekly Digest attached.
Last week, strong US economic data (personal income, spending, consumer sentiment) was overwhelmed by COVID news (a record 97,000 COVID infections were registered in the US in a 24-hour period, taking the tally over the past week to more than 500,000). Friday saw the release of positive Q3 GDP reports from the US (+33.1%) and Europe (+12.7%), though the big story of last week was the reintroduction of lockdown restrictions in France, Germany and now the UK, although measures are less stringent than in April.
Acceleration of COVID cases continues around the world, with just under 500,000 infections per day now. The recovery rate is just under 300,000 per day, suggesting hospital capacity is being used up. The recovery rate should catch up with the infection rate, however, and deaths are still around 6,000 per day – a similar rate to when COVID infections were running at less than 100,000 per day in April. This week should see the release of vaccine data from both Astrazeneca and Moderna. The UK is reportedly looking to accelerate a vaccine roll-out.
Turning to this week, the Brexit mood music is positive, with rumours that the UK and EU are making progress on the contentious issue of fishing rights. The issue of national support for industry remains unresolved. There are reports that Nigel Farage is to form a new party “Reform UK”, whose platform is anti-lockdown. The main focus of the week is of course the US Presidential election. 93 million Americans have already voted, which is 68% of the total for the 2016 election. Biden leads by 8% in most national polls, but by just 3% in swing states. The key states to watch are Florida, Pennsylvania, Michigan and Wisconsin. Florida is a critical state for Trump to win as, with 270 electoral votes for the President, the probability that we will not be able to declare a victor until the end of the week will rise materially. If Pennsylvania is contested by either candidate, this outcome is again a meaningful possibility. Florida has a long history of early voting and has been counting votes as they have been cast. We could have a winner declared in that state before 12:00 AM Eastern Standard Time (5am UK time). Regarding the Senate outcome, which is just as important for the economic outlook in terms of fiscal stimulus expectations, Democrats need to net three seats and win the Presidency or four seats if Biden does not win. If the Alabama Senate seat flips Republican (as polls suggest), there are five key races to watch in Arizona, Colorado, Iowa, Maine and North Carolina. However, if it is close, the balance may depend on Georgia, which itself may not know its outcome until 5th January (with a Georgia run-off).
Earnings season continues this week, with 128 S&P 500 companies and 96 Eurostoxx 600 companies reporting. Of particular interest to us are updates from Paypal and Estee Lauder (both earlier today, both strong), Ball Corporation, Electronic Arts, Zalando and Astrazeneca. The week’s economic data releases (including manufacturing data from Europe, the UK and the US) should generally point to ongoing improvement, but at a slowing pace. Thursday sees monetary policy meetings for both the US Federal Reserve and the Bank of England. There are no material announcements expected from the former, while the latter is expected to announce a further £100 billion of Quantitative Easing (QE).