Markets secure gains despite second lockdown - James Rowbury

Global markets have made some consistent gains this week, with the FTSE 100 adding 5.7% despite England entering a month-long lockdown in order to stop the spread of Coronavirus infections.

By Bird Lovegod
Sunday, 8th November 2020, 12:24 pm
Updated Sunday, 8th November 2020, 12:30 pm
The lockdown has affected every aspect of life in England.
The lockdown has affected every aspect of life in England.

On the other hand, the US S&P 500 rose 6.6%. As part of the announcement of the new month-long restrictions in England, which will require the closure of restaurants, pubs, gyms and non-essential shops, the furlough scheme has been extended until March.

Recently, firms had to top up furloughed wages by 20%, with the government paying 60%. However, now the state will contribute the full 80%, with the employer only covering national insurance and pension contributions.

Chancellor Rishi Sunak also announced that the self-employed will be able to claim state aid of up to 80% of profits.

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The rise is up from the current 40%, adding over £4.5bn of government support for the self-employed between November and January.

Businesses will also continue to be able to apply to banks for government-backed support loans until 31st January, compared with the initial 30th November deadline. Nevertheless, as the eligibility will be the same as for previous grants, as many as 2.9 million contractors, freelancers and newly self-employed people will remain excluded.

US stock markets have recorded their biggest post-election leap in decades. Shares rallied, mostly led by tech and health firms. Since election day, the Dow Jones has gained 6.5% while the wider S&P 500 and tech-heavy Nasdaq climbed 7.3% and 9.8%, respectively.

According to new official figures, the economies of the Eurozone bounced back in the third quarter of the year. Economic activity for the region as a whole grew by 12.7% in the three months to September, recovering from a record slump of 11.8% in the second quarter.

Annually, Eurozone gross domestic product contracted by 4.3% in the third quarter, easing from a record decline of 14.8% in the previous three months. However, the growth was not

enough to reverse the falls seen during the first half of 2020 due to the Coronavirus pandemic.

Furthermore, the outlook for the rest of the year remains highly uncertain, with further weakness expected, caused by a new surge of Coronavirus cases and tighter restrictions.

Data from Eurostat also highlighted that consumer prices in the euro area are expected to fall by 0.3% on annual basis in October, an unchanged rate of deflation from the previous

month. However, the annual core consumer price measure, which excludes food, energy, tobacco, and alcohol, increased by 0.2% in October.

Marks & Spencer has reported its first loss in its 94 years as a publicly listed company, as the Coronavirus pandemic continued to hit the retailer’s trading. In the six months to September, M&S made a loss of £87.6m, compared with profits of £158.8m at the same time last year.

However, Chief executive Steve Rowe, has said that the company’s performance has been much more ‘robust’ than what was initially expected.

Sales for the period across the group fell by 15.8% to £4,09bn, mostly dragged down by lower clothing and home sales. Clothing sales specifically, were dented by lockdowns as people demanded casual clothes instead, with clothing sales in city centre stores sliding 53% between July and September.

Although in August M&S announced it was set to cut 7,000 jobs over the three months, following its partnership with Ocado, the retailer is poised to benefit from high demand for online orders throughout the run up to Christmas.

The customer response to Ocado’s switchover from Waitrose to M&S was overwhelmingly positive, with demand for the new range driving an increase in the number of products in customer baskets. Despite the reported loss, the share price of M&S jumped 10.34% in the last week.

Please note that investments and income arising from them can fall as well as rise in value. Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.

By James Rowbury, Investment Research Coordinator, Redmayne Bentley