Global Markets Update – Monday 23 November 2020

COVID-19 Vaccine

There was further good news on the vaccine front, with Moderna reporting almost 95% efficacy for its vaccine. However, stock market gains were limited by signs that the pandemic was worsening, particularly in the US ahead of the critical Thanksgiving holiday, as well as rising tensions between the US Federal Reserve and US Treasury.


The FTSE 100 gained 0.6% over the week. The index is on track for its strongest monthly rally on record, helped by the outperformance of value stocks.

Trade negotiations with the EU were temporarily halted when a member of the EU team tested positive for Covid-19. The negotiations later resumed online, with a deal seeming potentially within grasp. In other news, the UK secured a trade deal with Canada that will roll over the terms of an existing agreement between the EU and Canada when the Brexit transition period ends on 1 January 2021.

Chancellor Rishi Sunak is expected to announce plans for a new National Infrastructure Bank as part of the UK government’s “levelling-up agenda”. The bank will help deliver the UK’s commitment to reach “net zero carbon” by 2050 and provide funding for projects across the UK. As UK government borrowing soars to the highest level on record, the chancellor is musing whether to freeze public sector pay and introduce sweeping changes to capital gains tax and pension contributions.

UK inflation, as measured by the consumer prices index rose 0.7% year on year in October, up from a 0.5% in September.


The S&P 500 slipped 0.4% over the week. Having touched a fresh record high on Monday, the index later slipped a new Covid-19 cases continued to hit record daily highs of almost 200,000 with little sign that US policymakers would end the post-election impasse and manage to agree to new stimulus measures.

Treasury secretary Steven Mnuchin decided not to extend several emergency lending facilities set up by the Federal Reserve. This was against the Fed’s wishes as, while the emergency lending facilities have been little used, their existence has been key in ensuring a credible safeguard against financial market stress.

US retail sales grew by a slower-than-expected 0.3% in November, compared to a 1.6% gain in October, due in part to a resurgence in new Covid-19 infections.

Pfizer filed a request to US regulators seeking emergency use authorisation for its Covid-19 vaccine.

Tesla shares surged on news the company was to join the S&P 500 Index in December.


The FTSEurofirst 300 rose 1.0% over the week. The index is on track for its strongest monthly rally on record, helped by the outperformance of value stocks.

Hungary and Poland vetoed the EU’s €1tn-plus budget and €750bn pandemic recovery plan over concerns on conditions attached to the funding. Budapest and Warsaw oppose the inclusion of a “rule of law” mechanism tying payments of EU money to adherence to European values. Without a budget deal in early December, the EU would have to resort to an emergency spending budget as of January 2021 which would result in billions of euros in lost payments to member states.


The Nikkei 225 increased 0.6% over the week.

Japan’s GDP growth increased by a stronger-than-expected 5.0% in the third quarter, its first expansion in four quarters. The growth was led by a bounce back in exports and marks the fastest pace of growth since the fourth quarter of 1968. However, second-quarter GDP growth was revised down to minus 8.2% from minus 7.9%.

Pacific Basin

Chinese retail sales rose 4.3% in October, the fastest rate of increase in 2020. Industrial output climbed 6.9% from a year earlier in October, the same percentage increase as in the previous month.

Emerging Markets

Turkey’s new central bank governor Naci Agbal increased the country’s benchmark one-week repo rate by 475bps to 15.0%. The move was the biggest interest rate rise in more than two years and signalled a change of direction as the central bank seeks to tackle double-digit inflation and stem the slide in the lira.


The yield on the 10-year US Treasury bond ended the week at 0.84%, helped by speculation that the Fed may be prompted into greater bond buying, particularly in longer-dated bonds, to help compensate for US Treasury’s decision to withdraw some emergency lending facilities.

The yield on the 10-year German Bund closed at -0.58%. The yield gap between 10-year German and Italian debt narrowed to a two-and-a-half year low as investors bet on further bond buying from the European Central Bank.

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Image by fernando zhiminaicela from Pixabay