Market Round-up: 16-20 November

Thomas Watts


This week

Another week, another potential COVID-19 vaccine, this time from US biotechnology firm Moderna, providing it seems not only a shot in the arm for mankind but also for global markets. 

Moderna announced on Monday that its experimental COVID-19 vaccine had proven to be 94.5% effective in preventing infection based on interim late-stage data. It was the second drugmaker in as many weeks, after Pfizer, to announce promising trial data in the development of a vaccine to defeat the pandemic. Whilst its shares gained 9.6% on the day, broader markets also traced their way higher once more, with the S&P 500 and Dow Jones notching record closing highs. 

Much like they had during the previous week, it was value stocks that led the way, in particular, travel and energy stocks, with most major airlines and cruise companies seeing their shares rise at least 5% on the news. Of the 11 major sectors of the S&P 500, all but healthcare ended the session in the black, with energy stocks enjoying the largest percentage gain. On domestic shores, the story was much the same with the FTSE 100 and 250 leaping over 1.5%, with cinema operator Cineworld topping the charts with a 13.5% gain. 

With investors clearly looking 6-12 months down the line, it seems that the main issue at the moment is just how much havoc the virus can wreak between now and when a vaccine is rolled out effectively in the new year. Indeed, markets largely trod water during the second half of the week as increasing infection rates across the UK, Europe and the US kept a lid on any further gains.

Also affecting the domestically-orientated FTSE 250 was the spectre of Brexit, as negotiations continued throughout the week but with little breakthrough. As if it wasn’t already clear enough, the EU’s Trade Commissioner said on Wednesday that Britain and the bloc were in the last moments to reach a Brexit trade deal. Adding to the difficulties of striking a deal, Thursday saw negotiations having to be suspended at the highest level as Michel Barnier was forced into self-isolation after a member of the EU’s negotiating team tested positive for Coronavirus. 

On the economic data front, data released showed the UK's inflation rate, which tracks the prices of goods and services, rose to 0.7% in October from 0.5% in September. The Office for National Statistics (ONS) said a rise in clothing and food prices had pushed the rate higher. Second-hand cars and computer games also saw price rises, a symptom no doubt of lockdown and also wanting to travel apart from others, but the ONS said these were partially offset by falls in the cost of energy and holidays.

Next week

With Brexit negotiations coming to a head, COVID infection rates still on this rise and worries over the logistics of Christmas during a pandemic, the coming week offers the perfect opportunity to gauge just how the domestic economy is faring.  

Such an occasion should arrive on Monday as the Bank of England’s (BoE) Governor, Andrew Bailey, is set to testify, along with BoE Chief Economist Andy Haldane, Monetary Policy Committee member Silvana Tenreyro and Monetary Policy Committee member Michael Saunders before a Treasury committee. Giving their views on the current state of the nation’s economy and future outlook, investors usually scrutinise the central bank’s words for hints as to future rate policy, with Mr Bailey’s thoughts in particular set to cause heightened volatility in the currency markets. The hearings are usually a few hours in length and can create market volatility for the duration. 

Governor Bailey’s address will be accompanied on Monday by both domestic manufacturing and services PMI. With both sets of data having bounced back considerably since the COVID-19 induced nadir of the spring, investors will be hoping for a continuation of the trend as both readings have shown increasing expansion throughout the year. With a reading of above 50 indicating expansion and a reading below, contraction, the data comes from a survey of around 650 purchasing managers who are asked to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. Acting as leading indicator of economic health, businesses react quickly to market conditions, with their purchasing managers holding perhaps the most current and relevant insight into the company's view of the economy. 

The week will be rounded off by Nationwide’s HPI data and should make for interesting reading. The numbers represent the UK’s earliest report on housing inflation, but usually produce only a mild reaction as buying and selling prices are not always correlated. However, their data still acts as a leading indicator as to the state of the UK’s housing market and should reflect the trend of increasing activity in the sector brought about, in part, by the government’s stamp duty changes. 

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 November 2020.