Market Commentary 9th November 2020 from Charlie Hancock

As England prepared to enter a national lockdown which is scheduled to end on the 2^nd December, online supermarket, Ocado, rose by 13.36% on expectation of increased activity in the coming weeks.

The Bank of England announced an increase of £150 billion to its quantitative easing programme last week, in an effort to boost liquidity in the banking sector. The bank stated that the outlook for the UK’s economic recovery remains uncertain. The UK Chancellor, Rishi Sunak, announced an extension of the furlough scheme until March.

Despite Greece, France and Spain introducing stricter restrictions in an attempt to curb the rise in coronavirus infections, sentiment in Europe was positive last week. Whilst equities in the region benefitted from the risk on mood globally, some positive earnings results from European companies contributed to the rally.

French bank, Societe Generale, posted strong results for the third quarter of 2020, with earnings which were almost twice as high as analyst estimates. Revenue was 2.9% lower than during the same period in 2019, with this decline being much less than feared. The bank’s share price rose by 12.37% across the week.

Although the working week ended without confirmation of the winner in the US presidential elections, the risk on sentiment in markets suggested that investors were confident any uncertainty would be short lived. As the week drew to a close, a victory for Joe Biden appeared likely, with investors shrugging off President Trump’s allegations of electoral fraud.

Whilst there has been speculation that a Joe Biden presidency would see tougher regulations imposed on healthcare and technology companies, these sectors performed well last week, suggesting that investors are not anticipating punitive policy changes. With the republicans expected to maintain control of the senate, it may be difficult for democratic led bills to pass through congress.  Microsoft rose by 10.49%, whilst Apple gained 9.03%. United Healthcare rallied by 13.87% and CVS Health saw a 15.80% gain.

The governor of the Bank of Japan, Haruhiko Kuroda, delivered a speech last week where he confirmed that the central bank intends to continue easing monetary policy. The central bank has been purchasing Exchange Traded Funds (ETFs) at a rate of $115 billion per annum since doubling the programme in March and Governor Kuroda indicated the bank has no plan to slow these purchases in the near future.

Headlines on China were dominated by the release of Purchasing Managers’ Index (PMI) surveys, which indicated China’s economy continues to recover rapidly from the coronavirus pandemic, together with news about Ant Group’s Initial Public Offering (IPO). Ant’s founder, Jack Ma, was summoned for interview by Chinese regulators on Monday, before the Shanghai stock exchange announced on Tuesday that the hotly anticipated IPO would be postponed. Ant’s parent company, Alibaba, saw its share price decline by 1.56% across the week as a result.

GBP / EUR – Current 1.1069 Previous 1.1123

The Pound climbed by 1.61% against the US Dollar, but lost 0.49% against the Euro. There were no meaningful developments in Brexit negotiations last week, with reports suggesting that both sides remain divided on issues such as state aid for companies and fishing rights.