Above page content

    Site map  Cookie policy

Last Week in the City

Last Week in the City: Technology slump accelerates

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 11 September.

hand using smart phone and laptop with London skyline as background
Garry white employee

Garry White

in Last Week in the City


The fall in technology shares continued. The tumble drove the Nasdaq index into correction territory, as it has lost 10% of its value since hitting a record high in the prior week. Big technology companies have led the charge higher since the market slump in March sparked by Covid-19. However, concerns over large options bets driving the market higher and rising geopolitical tensions coupled with an uptick in virus infections hit sentiment. Political agreement on further stimulus measures in the US now looks unlikely after a vote failed in the Senate this week.

A weakening pound caused by concerns over the Brexit moves by the UK government that could see a breach of international law boosted UK equities. UK indices have many multinational companies which have their foreign-currency profits and sales flattered on translation when sterling is weak. So, the FTSE 100 jumped 3.7% over the course of the week by mid-session on Friday, with the FTSE 250 up 1.2% over the same period.

Charles Stanley Radio

Listen to our Research team and Investment Managers discuss hot market topics.


Trials of AstraZeneca’s Covid-19 vaccine were paused after a volunteer fell ill. However, chief executive Pascal Soriot said it could still be available by the end of the year. AstraZeneca and Oxford University are jointly developing the vaccine and testing it on 50,000 to 60,000 people around the world, but halted trials on Wednesday to investigate the “potentially unexpected illness” of one participant.

With infections now rising in places that had hoped they had brought the virus under control, developing a safe, effective vaccine is more important than ever. We look at the issues in this week's article, Waiting for a Covid-19 vaccine.

UK rules on socialising were tightened amid a steep rise in Covid-19 cases. From 14 September, social gatherings of more than six people will be illegal in England. The law change will ban larger groups meeting anywhere socially indoors or outdoors, the government said. It will not apply to schools, workplaces or Covid-secure weddings, funerals and organised team sports. Previous guidance was that two households of any size could meet indoors or outdoors, or up to six people from different households outdoors. Until now, the police had no powers to stop gatherings unless they exceeded 30.

The US Senate failed to approve a scaled-back fiscal stimulus package. Democratic leaders and the White House broke off negotiations on a compromise more than a month ago, and with nothing further scheduled, chances are rising that there will be no further aid before the November election.

Insurance market Lloyd's of London said it expects to pay out up to £5bn for Covid-19-related claims. Insurers have paid out on event cancellation, travel, trade credit and business interruption policies due to the virus. However, there are court cases continuing to try to get some insurers to pay out for further virus-related losses.

Retailer Halfords said a 59% jump in cycling sales during the pandemic resulted in strong trading performance in the first half of its financial year. However, management warned that second-half profit could be significantly lower than the interim result.

Royal Mail reported a “substantial shift” in its business towards parcel delivery during the Covid-19 pandemic, but it also resulted in extra costs of £160m. Management said its outdated working practices needed to change to return the company to profitability. The shift from letters to parcels drove up costs by £85m. It incurred additional costs of £75m related to the Covid-19 pandemic from increased staff absences, physical distancing measures and protective equipment, with a further £65m to come in the next seven months.


The UK economy grew by 6.6% in July, but output remains far below pre-pandemic levels. It is the third month in a row that the economy has expanded. The Office for National Statistics (ONS), said that the UK "has still only recovered just over half of the lost output caused by the coronavirus".

The decline in Eurozone second-quarter GDP was revised to an improved -11.8% from its previous estimate of -12.1%. Domestic lockdowns were the dominant theme, with the lift of lockdown restrictions driving a rebound that will be visible in third-quarter numbers.

Nevertheless, unemployment data from the countries using the euro was grim. The number of employees across the 19 countries fell by 2.9% between April and June – this was the steepest fall since 1995. Since the pre-Covid peak at the end of 2019, the Eurozone’s workforce has dropped by 5.1 million – another record fall – to 155.6m, the lowest since the beginning of 2017.

German exports remained significantly below pre-pandemic levels in July, despite a 4.7% increase during the month. The figures imply Germany's economic recovery from the Covid-19 economic hit could be slow.


As campaigning for November’s US election intensified, President Trump said he was considering decoupling the US and China's economy. He also threatened to block companies that choose to outsource jobs to China from receiving federal contracts – and repeated his vow to bring manufacturing jobs and supply chains back to America if re-elected. “We will make America into the manufacturing superpower of the world – and will end our reliance on China once and for all,” he said. With the battle for the White House heating up, what does the US election mean for markets? We examine the issues in the podcast: US presidential election: What does it mean for markets?

It’s not only Chinese technology that the US plans to target. It was revealed that the US is developing plans to block exports from China's Xinjiang region due to allegations that they are produced using forced labour. The US Customs and Border Protection is currently preparing Withhold Release Orders which allows it to detain shipments based on suspicions of forced labour involvement. The law is aimed at combating human trafficking, child labour and other human rights abuses. The proposed bans on Chinese exports include cotton and tomato products, two of China's major commodity exports. By some estimates up to a million Uighur Muslims have been detained without trial for minor infractions, in what China says are re-education camps.

The Pentagon said it expected China to at least double the number of its nuclear warheads over the next 10 years – from an estimated figure in the low 200s now. In a report to Congress, US defence chiefs said China was nearing the ability to launch nuclear attacks by land, air and sea – a capacity known as a triad.

There appears to be more trouble for global supply chains and globalisation, this time coming from the European Union (EU). Chairman of EU leaders Charles Michel said that the bloc wanted strategic autonomy from regions such as the US and Asia in terms of autonomy on goods, such as car parts, on which EU companies rely. The aim is to “foster greater independence. You can listen to our podcast, Globalisation: The end of the party? on the main drivers of deglobalisation.

China and India accused each other of firing shots on their flashpoint Himalayan border, in a further escalation of military tension between the nuclear-armed rivals. The two countries’ relationship has deteriorated markedly since a hand-to-hand combat clash on 15 June in the Ladakh region, in which 20 Indian soldiers were killed.

The Indian government has suffered a bad economic hit from Covid-19 after the government adopted a stringent approach to lockdown. But could its much-needed reforms now be at risk? We look at the difficulties the pandemic has presented for India in this week's article, A long hot battle against the pandemic in India.

The relationship between Canberra and Beijing deteriorated further after two Australian journalists were forced to leave the country. This left Australia's media without any journalists working in China for the first time in almost 50 years. Bill Birtles of the Australian Broadcasting Corporation and Mike Smith, a correspondent for the Australian Financial Review – were told they were "persons of interest in an investigation" into Cheng Lei, an Australian anchor for state broadcaster CGTN. Ms Cheng was detained by police in China last week, but no charges have been brought.


Britain published draft legislation on how it wants to manage trade within its borders after Brexit, a bill which caused a new row with the European Union after Northern Secretary Brandon Lewis told the House of Commons that the legislation "does break international law in a very specific and limited way". The bill will put into domestic law British Prime Minister Boris Johnson's election pledges to ensure goods from Northern Ireland have unfettered access to Britain's market and make clear that EU state aid rules – which continue to apply in Northern Ireland – will not apply to the rest of Britain. The EU has threatened the UK government with legal action if it does not ditch its controversial Internal Market Bill by the end of the month. This means the chances of a “no-deal” Brexit have increased substantially – and the move resulted in a slump in sterling.


David Beckham's Guild Esports, which owns and develops esports teams, said it intends to list on the London Stock Exchange this autumn. However, it plans to raise just £20m, listing around 40% of its shares, Reuters reported. "The move comes as esports benefit from a rapidly-growing fan base worldwide with some tournaments attracting a bigger audience than the Wimbledon tennis championships, Tour de France and the US Open," the company said. This follows news two weeks ago that online retailer The Hut Group announced plans to raise £1.9bn in a London listing.

So far this year, the 13 listings in the UK have raised £2.1bn, although £1.6bn of that came from one deal – China Pacific Insurance. Over the same period last year, 25 companies listed in London, this was down from 58 in 2018.


Japan’s SoftBank was named in reports as the “Nasdaq whale,” that bought billions of dollars in individual stock options in big tech companies over the past month. This drove up volumes and contributed to sharp rises in the sector. The call option buying provided an upward lift to the market because the sellers of those calls, then had to buy stocks and hedge, making the market rise a self-fulfilling prophecy. Softbank shares tumbled on the news, but the company is yet to comment on the trades.

Technology remains central to the trade dispute between Washington and Beijing, as each side endeavours to jump ahead of the other in producing the technology that will drive the economy of tomorrow. China said its technology companies are victims of “naked bullying” from the US. The accusations came as the Chinese government launched a new set of global guidelines for technology companies to protect the integrity of its own citizens’ data. Its new initiative outlaws illegally obtaining people's data and large-scale surveillance. This is the latest clash between Washington and Beijing over data security issues which has already embroiled TikTok, Huawei and WeChat.

Shares in China's largest chip manufacturer fell sharply after the US revealed it could be treated in a similar fashion to Huawei. Semiconductor Manufacturing International Corporation (SMIC) said it was “in complete shock and perplexity” after the Pentagon revealed it had proposed the company be added to a government blacklist. Garry White looks at Chinese efforts to continue to be a technology leader in the field of semiconductors that will power 5G in this week's article, China plans to pull further ahead of the US in 5G.

Huawei unveiled plans to pre-install its own Harmony operating system on its smartphones from next year. The Chinese company said it would also offer the software to other manufacturers to use as an alternative to Android. Huawei is currently the world's second bestselling handset-maker, after a brief time in the top spot. Google's Android accounted for 85.4% of smartphones shipped last year, according to research company IDC, and Apple's iOS the remaining 14.6%.


Oil prices fell, pressured by a surprise rise in US stockpiles as the Covid-19 pandemic continued to erode demand for fuels. Brent crude prices fell almost 6% by mid-session on Friday, to trade just below $40 a barrel.

Transport & travel

Tesla shares fell after the company was left out of the S&P 500 by the committee that decides on new additions to the index. Shares in Elon Musk’s electric vehicle maker have, nevertheless, risen around 400% this year and the company is valued by the market at more than some of the world’s largest automakers, including Toyota and Volkswagen. New additions to the index are as follows: e-commerce site Etsy; automatic test equipment maker Teradyne; and pharmaceutical firm Catalent. However, the committee has the power to make changes to the index between official reshuffles.

More turbulence is brewing for aircraft maker Boeing, which is still trying to recover from crashes of two of its 737 Max planes. After the company notified airlines in late August of manufacturing issues with some of its 787 Dreamliner aircraft, eight of these planes were grounded. The problem was a result of quality-control issues during production. Now, the Federal Aviation Administration is stepping in to investigate potential defects in the aircraft program's production.

Short-haul airline easyJet said it will cut flight numbers to less than 40% of its previously expected capacity in the fourth quarter. It said it was thinning its schedule to focus on profitable routes after the UK government announced more quarantine measures, which the airline said had knocked consumer confidence and reduced demand for travel. Ryanair also cut its annual passenger target to 50 million passengers from a forecast of 60 million made in July. IAG followed suit, saying quarantine restrictions meant capacity this autumn would be 60% below 2019 levels. However, there was also some positive news for the sector…

Demand for a bond offer from Ryanair was significantly ahead of supply. The Irish-based carrier sold an €850m bond, its first in three years. Investors put in €4.4bn of orders for the bond, the second recent offer by a European airline since the Covid-19 pandemic. It followed majority state-owned Finnair issuing a hybrid bond, which combines debt and equity features. It also raised €400m from shareholders last week. Credit rating agency S&P said it considered Ryanair to be one of the financially strongest airlines as it removed its 'BBB' rating – two notches above junk – from 'credit watch', making an imminent downgrade less likely. Only three airlines now have their debt rated as investment grade: Ryanair, easyJet and Southwest Airlines.


There was some tentative bright news for Britain’s embattled shopkeepers. Retail sales growth accelerated in August, as people appeared to be increasingly keen to upgrade their homes with new furnishings and appliances. Total sales were up 3.9% compared with August last year, according to the British Retail Consortium. Online sales were the major driver, rising 44.2%. This was at the expense of bricks-and-mortar shops, with in-store sales falling 17.8%. Sectors such as beauty, clothing and footwear – which are reliant on high footfall locations – continued to struggle.  This is the third consecutive month in which sales have been more than 3% higher than in the same period of 2019 – and represents the strongest rate of overall growth since May 2018.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Get in touch

Find out more

Our focus on clients has endured since the foundation of Charles Stanley in 1792 and has helped make us one of the UK's leading wealth management firms. Your interests give shape to everything we do.

Please call us to talk about your circumstances or complete the enquiry form.

020 3797 1783

Make an enquiry

If you have some questions we'd be happy to help.

Get in touch

Coronavirus (COVID-19)

Our latest information

Stay updated

Subscribe to our weekly email newsletter.

Subscribe here

Local Office

Your local office

Your local Charles Stanley office can help advise you on a wide range of investment management services.

Select an office


Newsletter banner signup