Market Commentary 12th October 2020 From Charlie Hancock

The standout performer in the FTSE 100 was Rolls Royce Group PLC, which saw a 96.48% rise across the week. With revenues sinking this year, the group recently announced plans to raise £5 billion in order to survive the current crisis, causing the share price to tumble.  It appears that investors saw this as a buying opportunity, with the shares in heavy demand last week.

Further evidence of rising activity in the UK property market came via Halifax’s house price index for September 2020, which was published on Wednesday. The index showed the average house price rose 7.3% over the last year, helping housebuilders to post strong performance across the week. Barratt Developments PLC rose by 10.49% and Taylor Wimpey PLC gained 9.97%.

Whilst the stubbornly high rates of coronavirus cases in Spain and France continued to make headlines, investors appeared to be relatively unphased, with the DAX posting gains every day last week.

Much of the market movement last week was driven by reports surrounding negotiations in congress for a new ‘coronavirus relief’ package. After positive rhetoric at the start of the week drove equities higher, markets paused on Tuesday when President Trump tweeted that he had instructed his representatives to stop negotiating until after the election.

The President appeared to change his mind later that day, tweeting his support for relief aimed at airlines and small businesses, as well as further direct stimulus payments to individuals. Negotiations continued during the 2^nd half of the week, but investors appeared confident of a deal being reached before the election.

Data tracking consumer behaviour in China during the holiday period suggested that travel was much lower than 2019’s holiday week. Tourism revenue fell by 30% in comparison to the previous year as a result, however, overall consumer spending was higher, indicating that consumer confidence remains at a healthy level.

In recent months, the yield on bonds issued by periphery nations, such as Italy, have declined significantly. The 10-Year Italian government bond saw a high of 2.39% in March and is currently yielding just 0.68%. This indicates that the actions taken by the European Central Bank to lower borrowing costs and avoid a financial crisis have been successful.

GBP / EUR – Current 1.1027 Previous 1.1042

The Pound climbed by 0.78% against the US Dollar last week and declined by 0.14% against the Euro. Whilst Brexit negotiations intensified last week, with various meetings taking place between officials from the UK and the EU, there were no significant developments to drive movements in the Pound.