Market Update

As depicted in the provided table, the past week presented a mixed picture: while US equity markets experienced slight gains, their counterparts in the UK and Europe ended on a lower note.
This disparity can be largely attributed to the imposition of new localized coronavirus lockdowns, with daily infections nearing 140,000 on Thursday, October 15, 2020. Despite these challenges, it's crucial to recall the resilience displayed by the US economy and equity markets during the summer when daily new cases consistently exceeded 70,000. This resilience suggests that the UK and Europe, too, possess the strength to withstand these new lockdown measures.
The FTSE-100, one of the worst-performing equity markets, faced setbacks due to stalled progress in Brexit negotiations. Nevertheless, the Footsie saw a significant surge on Friday, October 16, 2020, following Boris Johnson's announcement that UK-EU post-Brexit trade talks had concluded. However, this is unlikely to mark the end of the Brexit saga, as President of the European Commission, Ursula von der Leyen, indicated plans for the EU negotiation team to intensify discussions in London during the following week.
Speculations have shifted from a comprehensive "Canada-style" relationship to a less extensive arrangement akin to the EU's association with Australia. This effectively amounts to a no-deal Brexit, where most trade operates under World Trade Organisation (WTO) rules. Potential tariffs pose a risk to UK exporters' competitiveness, potentially leading to higher prices for European goods. Notably, previous tariffs imposed by the US and China during their trade war had limited impact on prices, as companies absorbed the costs by reducing export prices.
Amid these challenges, there are positive aspects for UK equities. Having declined by 21.52% since the year's beginning, UK equities present attractive valuations, characterized by low price-to-earnings multiples and appealing dividend yields. Additionally, despite earlier coronavirus-induced dividend disruptions, many companies are now resuming or increasing dividend payments.
In the US, the situation is nuanced, offering something for both optimists and skeptics. The prospects of a new fiscal stimulus deal before the November 3, 2020, Presidential election are dim. However, US retail sales defied expectations, surging by 1.9% in September, indicating that US consumers still have spending power. Although initial jobless claims rose to 898,000 from 840,000 the previous week, continuing jobless claims were notably lower, at just over 10 million compared to 11 million the previous week.
Looking ahead to the upcoming week, the US anticipates housing data, the Fed’s Beige Book, weekly jobless claims, and PMI data. In the UK, key data includes CPI inflation, retail sales, and PMI data. Europe will be focusing on consumer confidence and PMI figures, while China is set to release Q3 GDP, industrial production, and retail sales data. These developments will play a significant role in shaping market sentiments in the coming days.