Market Round-up: 7-11 December

Thomas Watts


Weekly Round Up 

After it was revealed that pizzas had to be delivered to Whitehall last week as Brexit negotiations wore on late into the night, it seems that talks have become much more civilized recently, culinarily anyway. Speaking of a “lively” dinner of turbot on Wednesday, the European Union’s Chief Commissioner Ursula von der Leyen pushed the deadline until the end of the weekend to seal a new trade pact after failing to overcome persistent sticking points during negotiations. 

Ironically, it seems to be fisheries that have become the main bone of contention in recent weeks, as Foreign Secretary Dominic Raab commented, the main points of contention - fisheries and commitments on a level playing field - were narrow in scope but they were matters of principle for Britain, a case for some sole searching indeed. With the news of an upcoming deadline and little progress having been made, it was sterling that was really schooled, falling over 1% against the US Dollar, back towards 1.325. 

Unsurprisingly, it was more domestically orientated stocks that were on the hook, with housebuilders, retailers and leisure stocks all leading the FTSE 250 lower. Across the Channel though, there was much to be optimistic about as data showed German exports rose less than expected in October, but foreign trade still gave Europe’s largest economy a boost at the start of the fourth quarter as it struggles to avoid slipping into a COVID-19 induced double-dip, recession. 

It seemed that the US was the plaice to be during the middle of the week as once again the S&P 500 and Nasdaq posted record closing highs after encouraging COVID-19 vaccine news. Johnson & Johnson shares rose after the company said it could obtain late-stage trial results of a single-dose COVID-19 vaccine it is developing earlier than expected, whilst Pfizer also gained as it cleared the next hurdle in the race to get its vaccine approved for emergency use after the US health regulator released documents raising no new safety or efficacy issues.

On the domestic economic statistics front, data showed that consumer spending in some sectors continued to flounder in November, as new lockdown restrictions to curb the spread of COVID-19 kept consumers koi. The British Retail Consortium-KPMG retail sales monitor for November found that over the three months to November, in-store sales of non-food items declined 18.6% in total and 10.8% on a like-for-like basis.

Week Ahead

Although the tone for the coming week could be decided as early as Sunday evening, the self-imposed day of reckoning for Brexit negotiations, analysts still have a lot to look forward to in terms of economic data releases, especially towards the second half of the week. 

As relations with European counterparts reach breaking points in Westminster, it will be on the continent that we first cast our gaze as Markit releases a raft of various services and manufacturing data from Europe’s largest economies. The release should give us a comprehensive view of just how well the continent is bouncing back from the COVID-19 induced slump of March and April, detailing performances from southern European nations such as Spain and Italy and more industrial powerhouses such as France and Germany. 

Back on more domestic shores, the Bank of England (BoE) ushers in “Super Thursday” the day after, an attempt to release a month’s worth of economic data in one afternoon. Releasing their thoughts on the domestic economy, Andrew Bailey, Governor of the BOE will comment on the state of the UK’s economy, gauging the destruction the most recent lockdown has inflicted on the economy whilst hopefully ending on a more positive tone, offering more insight into how the bank will act once a vaccine is widely available next quarter.

The end of the week is wrapped up in the US where the results of the latest bank stress test should be announced. Little could put more stress on financial institutions than the global pandemic has this year, however, the US Federal Reserve still applies synthetic market conditions to the books of large domestic banks in an effort to determine the banks’ stability and ability to repay government loans. Results of the second round of bank stress tests will be released for 34 of the largest US banks, including which banks passed, which failed, estimates for new capital requirements, and whether they will be able to increase dividends and share buybacks, proving vitally important not only for investors in such institutions but also for the broader US economy.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in December 2020.