Global Markets Update – Monday 21 December 2020

Covid-19 Vaccine

Global equities generally advanced as COVID-19 vaccine rollouts, central bank pledges and hopes of an end to political wrangling on both sides of the Atlantic helped to lift investor mood.


The FTSE 100 eased 0.3% over the week.

The discovery of a new strain of COVID-19 that appears to be more infectious forced London and much of the south east of England back into shock lockdown, meaning the cancellation of Christmas plans for millions of people. Wales also entered a national lockdown, while Scotland banned travel with other UK nations. The move followed similar moves across Continental Europe, with Germany, the Netherlands and Italy all imposing tighter restrictions.

The chances of a Brexit deal appeared to rise after a phone call between Boris Johnson and European Commission chief Ursula von der Leyen. The EU’s chief negotiator said good progress had been made, although news at the end of the week was less promising with fishing rights the main stumbling block.

The Bank of England held interest rates steady at 0.1% and kept the target for its asset purchase programme unchanged. The bank’s committee reiterated it did not intend to tighten monetary policy until there was evidence that “significant progress” was being made in achieving the 2% inflation target.

The unemployment rate rose to 4.9% in the three months to October, and the country suffered the largest annual fall in employment for a decade.

Retail sales fell by 3.8% in November, the first fall in six months as England was placed into a second lockdown. However, data tracking bank transactions show that consumer expenditure surged 9.4% in the week ending December 13, the first complete week after the lockdown ended, compared to the same week the previous year.


The S&P 500 fell 1.5% over the week.

The Electoral College officially selected Joe Biden as the 46th US president. Donald Trump continues to refuse to accept the election results. He has also rejected claims of Russian involvement in a massive cyber-attack on the US government and companies, the impact of which he says is exaggerated, and has threatened to veto a $740bn defence spending bill. Additionally, the Trump administration has put 60 Chinese companies, including Semiconductor Manufacturing International Corporation and DJI, the drone maker, on a US export blacklist, and imposed sanctions on NATO-member Turkey in retaliation for its decision to buy a Russian missile defence system.

Federal Reserve chairman Jay Powell bolstered the US central bank’s message that it will not curtail its bond-buying programme until “substantial further progress” is made towards full employment and higher inflation.

Negotiations continued over a hoped-for $900bn stimulus package, which would include a fresh round of direct payments to American households. Congressional Democrats and the incoming Biden administration accused Republicans of jeopardising the deal by insisting on curbs to the Fed’s crisis lending powers.

First-time jobless claims rose to a three-month high of 885,000 last week.

The Federal Reserve will allow the most profitable US banks to resume share buybacks for the first quarter of next year.

Tesla became the largest ever stock to enter the S&P 500 index.


The FTSEurofirst 300 gained 1.3% over the week.

The European Central Bank will allow eurozone banks to restart dividends from the start of next year, providing they are profitable and have “robust capital trajectories” that can withstand the impact of the coronavirus pandemic. It is recommended that banks only distribute up to 15% of their past two years of profits to shareholders and no higher than 0.2% of their common equity tier one capital ratio.

The IHS Markit flash eurozone composite managers’ index rose to a better-than-expected 49.8 in December, compared to 45.3 in November, as a continued contraction in services activity was offset by resilient manufacturing. Services PMI rose to 47.3, up from 41.7 in November, while manufacturing PMI rose to a 31-month high of 55.5, up from 53.8 the previous month.


The Nikkei 225 inched higher by 0.4% over the week.

The Bank of Japan extended its special coronavirus loan programmes by another six months to September 2021, and announced a review of its monetary policy to consider “further effective and sustainable monetary policy easing”.

The Bank of Japan’s quarterly Tankan survey improved to a level of minus 10 in the final quarter of the year, compared with minus 27 in the third quarter, and beating analyst expectations for a reading of minus 15.

Pacific Basin

Chinese industrial production increased 7% year on year in November, while retail sales rose 5%. This was the fastest pace of expansion for both metrics so far this year. Retail sales growth was buoyed in November by “Singles’ Day”, the world’s biggest shopping festival. Fixed asset investment has risen 2.6% over the year to date.

New Zealand’s economy grew a record 14% in the third quarter, boosted by a resurgence in household spending.

Australia upgraded its economic and budget forecasts to reflect a faster rebound. Overall growth this year is now forecast at 0.75%, compared to a 1.5% contraction predicted in the budget.


The yield on the 10-year US Treasury bond closed the week at 0.93% while the 10-year German Bund yield ended at -0.57%.


Sterling touched a two-year high against the US dollar amid rising optimism that the UK would strike a trade agreement with the EU before year-end following a second more-positive call between Boris Johnson and Ursula von der Leyen.

Iraq devalued its local currency by a fifth as it battles a deep financial crisis triggered by the collapse in the global oil price.


Oil rose to a nine-month high of above $51 a barrel.

Copper reached a seven-year high of $8,000 a tonne, fueled by a surge in demand for copper to wire the green economy: electric vehicles need around four times more wiring than those with combustion engines, while solar panels and wind farms need as much as five times that needed for fossil fuel power generation.

Image by fernando zhiminaicela from Pixabay