Global Markets Update – Monday 14 September 2020

Stock rally

European stocks gained but tech stocks continued to sell off, causing the Nasdaq Index to fall into correction territory.


The FTSE 100 rallied 4.0% over the week.

The UK struck its first major post-Brexit trade deal after signing a deal with Japan. The deal aims to boost trade between the countries by about £15bn.

The UK government faced a backlash from MPs on both sides of the house as well as the EU after publishing an Internal Markets Bill which it admits breaks international law by overriding key elements of last year’s Withdrawal Agreement with Brussels.

Confirmed Covid-19 cases rose sharply in the UK. As the R rate rose back above 1, fresh restrictions were imposed in Birmingham. As of Monday, larger gatherings will be banned throughout England and Scotland, with people having to abide by the ‘rule of 6’.

UK GDP expanded 6.6% in July as hospitality venues and hairdressers reopened. However, the growth was below expectations and the bounce back has only reversed around half of the sharp drop seen in the Spring.

Consumer spending rose 0.2% in August, compared to the same month in 2019. This is the first year-on-year increase since the lockdown began.

Arm Holdings is to be sold to Nvidia for $40bn. The UK company was bought by SoftBank four years ago.


The S&P 500 fell 2.3% over the week. The rout in tech shares continued, with the Nasdaq falling 4.1%, meaning it is now 10% lower than the all-time peak it hit during the previous week. Tesla was particularly volatile as it failed to gained entry into the S&P 500 Index. According to Citigroup, before the sell off the top 10 US tech companies were trading on a trailing 12-month price-to-earnings ratio of 75 times, versus 76 times during the dotcom bubble. Also, at the peak of its share price on 1 September, Apple’s market capitalisation surpassed that of all of the companies in the Russell 2000 Index of small-cap US stocks.

Concerns about the US recovery grew after Democrats in the Senate voted to block legislation relating to a further stimulus package put forward by Republicans. They argued that the package was too small and failed to provide adequate support to the hardest hit households.

US inflation ticked higher for the third consecutive month, with prices rising 0.4% in August compared to July. Core consumer prices rose 1.7% year-on-year in August, the highest level since the pandemic began.


The FTSEurofirst 300 rose 1.8% over the week.

EU finance ministers agreed to postpone any debate on when to reimpose tough budget restrictions as the continent faces a new surge in Covid-19 infections.

German exports rose 4.7% over the month of July to their highest level since February, while French exports increased 9.6%.

The decline in eurozone GDP over the second quarter was revised to -11.8%, from an original estimate of -12.1%. The French statistics office said French GDP had recovered to around 95% of pre-Covid levels in August.

German industrial production rose by a weaker-than-expected 1.2% over the month of July.


The Nikkei 225 inched higher by 0.9% over the week.

SoftBank shares fell after it was revealed to be the mystery “whale” that had driven US technology stocks to record highs through aggressive bets on equity options.

Pacific Basin

Chinese exports jumped by a stronger-than-expected 9.5% in August, compared to a 7.2% increase in July and a 0.5% rise in June.

China banned pork imports from Germany, saying the move was intended to “protect the animal husbandry industry and prevent the spread of the disease” after Europe’s largest economy reported its first case of African swine fever.

Emerging Markets

South Africa’s economy shrank 16.4% in the second quarter, its worst slump since the 1990s.


The yield on the 10-year US Treasury bond closed the week at 0.67% while the yield on the 10-year German Bund closed the week at -0.48%.


The British pound dropped 3% against other major currencies as the prospect of a no-deal Brexit increased.

ECB president Christine Lagarde was seen as opening the door to further appreciation in the euro. While admitting the euro was putting “negative pressure” on inflation, Ms Largarde said the central bank had to “monitor carefully such a matter and this was indeed extensively discussed during our governing council”.

The Russian ruble weakened to its lowest level against the euro since February 2016 after Germany raised the prospect of sanctions in response to the poisoning of opposition leader Alexei Navalny.

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