Market Commentary 2nd November 2020 from Charlie Hancock

Investor sentiment deteriorated throughout the week, with rising numbers of coronavirus cases prompting Germany and France to announce further lockdown restrictions. Investors began to speculate that other developed nations could follow suit in the near future, prompting stock market falls around the globe.

News of further lockdowns in Europe resulted in declines for airline stocks, with the parent company of British Airways, International Consolidated Airlines Group, seeing a fall of 11.52% last week. Online supermarket, Ocado, performed well in comparison to the wider market, registering a decline of 1.60% across the week.

German Chancellor Angela Merkel announced on Wednesday that new lockdown restrictions would come into effect from Monday 2^nd November. Merkel cited difficulties in the track and trace system, stating that “on average, we no longer know where 75% of infections come from”. After reporting a record high of 52,000 new daily cases on Monday, French President Emmanuel Macron also announced new nationwide lockdown measures.

Delivery Hero, an online takeaway food delivery platform which is headquartered in Berlin, bucked the trend in DAX index companies last week, with its shares rising by 7.77%.

A combination of concerns around the economic impact of lockdowns in Europe, lack of progress on a fiscal stimulus package and mixed earnings results added to the volatility in US equities last week.

Around 85% of S&P 500 companies who have reported 3^rd quarter earnings so far have beaten expectations. As a result, investors have looked beyond headline results and sold off companies where the outlook is less optimistic. Facebook Inc released their Q3 results last week, which showed revenue 21.6% higher than during Q3 2019, but the number of active users in the US declined. Their share price fell by 7.61% across the week.

With coronavirus case numbers in much of Asia under control, there are less concerns around the prospect of further lockdowns in comparison to Europe and the US. Last week saw Taiwan reach a record of 200 days without any domestically transmitted cases of Covid-19.

Chinese Technology giant, Tencent, saw its share price rise to new all-time highs, posting a gain of 5.25% across the week. The company’s share price is up by 54.55% in the year to date.

A closely watched business confidence survey in Germany showed a decline for the first time since April, prompting fears of a double-dip recession.

Nervousness amongst investors prompted heavy demand for Treasury stock during the early part of the week, pushing the yield down to 0.29% on Tuesday, however, the yield recovered during the remainder of the week.

GBP / EUR – Current 1.1123 Previous 1.0997

The Pound lost ground against the US Dollar last week, weakening by 0.71%.  Sterling rose by 1.15% against the Euro, where concerns of lockdowns across the continent dragged the Eurozone currency lower.