Market Round-up: 21-25 September

Thomas Watts


This week

The week that was saw the introduction of the new rule of 6, an attempt by the government to stymie rising levels of COVID-19 infections, with all pubs, bars and restaurants closing at 10pm rather than the customary last orders at 11. Indeed, it was a tough week for the men in both Nos 10 and 11 as the government’s successor to its furlough scheme also came into focus.

Although many have debated whether 6 is a viable number for combating the spread of the virus; of course as any mathematician will tell you, 6 is the smallest mathematical perfect number, being the sum of its divisors, 1, 2 and 3. However, pleasing mathematicians is one thing, investors, quite another.  

Monday saw European stocks post their worst fall in three months as growing fears of a second wave of COVID-19 infections hit the travel and leisure shares particularly hard, while banks, led by HSBC, tumbled on a report about £1.5 trillion worth of suspect money transfers from Europe’s largest lenders. With HSBC being the largest constituent of the FTSE 100, it was hardly surprising that the scandal, predominantly surrounding the bank, dragged the index down 3.4%.

Although there was some evidence of a bounce back in beaten up leisure industry stocks the following day, the real winner was German trainer and fitness apparel maker Adidas. On the front foot, the company was seen to be in step with Nike’s better than expected earnings and strong sales during lockdown, resulting in a gain of 4.4%. Investors evidently still exercised caution as global markets failed to recoup much of the losses they had endured during the beginning of the week. 

On domestic shores, the chancellor also made the difficult choice of maintaining the end-date of the country’s furlough scheme on Thursday, citing that it was “fundamentally wrong” to keep people in unviable jobs and that support must “adapt and evolve”. The scheme will now be replaced with the government subsidising the pay of employees who are forced to work reduced hours in “viable” roles rather than covering wages of those in industries still unable to re-open. Currency markets in particular took the news in their stride, gradually creeping up over the $1.275 mark. 

It was revealed at the end of the week that the government had borrowed £35.9bn in August to tackle the economic fallout from the pandemic. To put the amount borrowed into perspective, this was £30.5bn more than it borrowed last August, the greatest increase year on year since 1993, a number which pleases neither investors nor mathematicians.


Next week

As the coming week sees September transition to October, ushering in autumn with its shorter days and chillier feel, many will be checking the government’s travel advice to see where they can escape to for a bit more sun, especially in Europe.

It is in Europe that many market commentators will be escaping to next week as Christine Lagarde, President of the European Central Bank (ECB) is due to testify before the European Parliament. As head of the central bank which controls lending rates as well as having more of an influence over the value of the common currency than most others, those following the currency markets will scrutinise her words for any hints as to future rate policy.

From Lagarde’s address to just changes in address, the Bank of England will release its mortgage approval data on Tuesday, detailing the number of new mortgages approved for home purchases during the previous month. The ripple effect from a house move can permeate many different sectors, including the bank and the estate agent that facilitated the move and the retailers who benefited from new items for the house being bought. 

With the start of October falling into the zodiac sign of Libra, often represented by the symbol of scales, investors will be forced to weigh up a raft of US employment data, including US Non-Farm Payroll data. This is a key piece of information when determining the US central bank’s next rate move, and the numbers will be accompanied by Average Hourly Earnings allowing us to gauge how inflation may manifest in the world’s largest economy.  With the Fed stating that it will allow inflation to “run hot” over the coming period, it will be interesting to see whether  wages rise accordingly.


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 September 2020.