Week ending 4th December 2020.

It’s beginning to look a lot like a Christmas broken record as this week’s equity market theme is a familiar one:  a tug of war between the short-term coronavirus impact on one side and the long-term optimism, thanks to vaccine developments, on the other.

However, as you can see from the accompanying table, the clear winner was the UK’s FTSE-100 which ended the week with a gain of nearly 3%.  The approval of Pfizer’s coronavirus vaccine is a ray of sunshine as it obviously enhances the UK’s recovery prospects – especially given the relative outlook after news that Germany’s lockdown restrictions were being extended until 10 January 2021 and the Mayor of Los Angeles ordered residents to stay in their homes as coronavirus cases and deaths continue to rise.

US indices also ended the week higher as we may be getting close to the point where bad news is actually good news!  For example, today’s (Friday 4 December 2020) nonfarm payroll growth of 245,000 was slower than we had anticipated – and as a consequence, this may increase the pressure on the Republicans and Democrats to reach a deal on a new US fiscal stimulus plan to help those households and businesses that have been hard-hit by the coronavirus outbreak and associated lockdowns (which will be positive for equity markets).

Elsewhere, this week’s economic data suggests to us that the global economy is still on a recovery trajectory despite the latest resurgence in coronavirus cases.  For example, Chinese PMIs (Purchasing Managers’ Index) and activity data confirmed the economy is powering ahead; while in the US, continuing claims for unemployment benefit fell to 5.52 million from 6.09 million.

Looking ahead to this coming week we have US CPI inflation and weekly jobless claims; UK GDP data for October along with industrial and manufacturing production; and an ECB monetary policy meeting.  And you never know, we may get an announcement on a Brexit trade agreement!

Investment Management Team