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Last Week in the City: Time running out for TikTok?

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 7 August.

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 7 August.
Garry white employee

by
Garry White

in Features

07.08.2020

The UK’s recession will be less severe than feared but unemployment is likely to surge in the second half of the year, according to the Bank of England. The second-quarter reporting season showed many companies beating expectations, but the expectations were pretty low. Tension between the west and China accelerated towards the end of the week after the US government banned American citizens from dealing with TikTok and WeChat, two major Chinese technology groups.

The FTSE 100 was up 1.9% over the course of the week by mid-session on Friday. The FTSE 250 was up 3.1% from the prior Friday on hopes of further stimulus measures and positive data.

July round-up: Whilst equities have recovered impressively from their March lows, this year has been characterised by widely divergent regional stock market performance. Chief Investment Officer Jon Cunliffe looks at markets in July here.

Global markets: Equity-market performance around the world has diverged in response to government stimulus measures and those exposed to the digital revolution. We look at performances here.

Keep safe on the internet: Recently, John Harrison, Charles Stanley’s Head of Information & Cyber Security took part in an Akademia short video, where experts give top tips in 15 minutes. You can watch it here.

Charles Stanley Radio

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

The Paradox of Inflation: In this episode, we are joined by Investment Managers from our Edinburgh office to discuss the mythical beast of inflation. Listen here.

Harlequins Mindfulness Series: In partnership with Harlequin FC, Luke Doherty, the team’s mindfulness coach, talks to us about the importance of mindfulness in both our professional and personal lives. Discover what he had to say here.

Cyberwar: the biggest threat this century? In this episode, we discuss the increase in international cyber-attacks and what this means for technological market growth and the future of cyber security. Listen here.

The radio page with all previous recordings can be found here.

Covid-19

US President Donald Trump said it was possible that America would have a Covid-19 vaccine before the 3 November election, a more optimistic forecast on timing than anything suggested by his own White House health experts.

Brazilian President Jair Bolsonaro issued a decree that will set aside $360m to purchase and eventually produce the potential Covid-19 vaccine being developed by AstraZeneca and Oxford University researchers.

Human trials on a potential coronavirus vaccine are due to start in Indonesia next week as part of a collaboration between state-owned pharmaceutical company Bio Farma and China's Sinovac Biotech.

Tougher lockdown restrictions have been enforced in parts of Northern England, following a recent spike of cases in some areas. The UK government announced the strict measures on July 31, with the new rules affecting people who live in parts of Greater Manchester, East Lancashire and West Yorkshire. Similar restrictions are already being enforced in Leicester.

Nearly half the workers at private firms in Australia's Victoria state, around 1.5 million people, will receive a federal wage subsidy as a surge of coronavirus cases forces a near total lockdown in the state, as Covid-19 cases rise.

Africa's confirmed cases of Covid-19 have surpassed 1 million as transmission rates increased. India suffered a record jump in cases to pass 2 million. Cases in France rose to levels not seen since May and Germany introduced mandatory testing for travellers.

Economics

The Bank of England warned that UK unemployment will spike at 2.5 million by the end of the year, as companies cut jobs due to the shock of Covid-19. In its latest forecasts, the Bank predicts the jobless rate will almost double to 7.5%, and only fall slowly in 2021. The Bank was also less pessimistic about the economic shock, having seen growth pick up faster than it expected. It now predicts GDP will shrink by 9.5% this year – a major fall, but not as bad as it thought in May. However, it also fears the recovery will take longer, with the UK not expected to reach its pre-Covid level until the end of 2021.

Purchasing manager indices (PMIs) across the world showed good bounces, but they jumped from a low base – and concerns about the impact of rising unemployment in the second half of the year on demand remain.

The US is projected to undergo the biggest increase in economic misery across 60 countries as the nation grapples with heightened unemployment and fresh coronavirus hotspots. Bloomberg's Misery Index, which ranks major economies by inflation and unemployment expectations, shows the country sinking to rank 25 from rank 50 in 2020. Venezuela, Argentina, and South Africa held their spots as the world's most miserable economies. Only Iceland, Israel, and Panama were close to that level of deterioration in the annual rankings.

Another 1.18 million Americans filed for unemployment benefits over the last week. Claims dipped in the prior week after two weeks of gains. Before the pandemic hit, the record for weekly US claims was 695,000, set in October 1982.

China’s exports rose 7.2% year-on-year in July due to demand for medical supplies. Germany’s trade surplus jumped a record 14.9% month-on-month in June, strong recovering from a drop earlier this year. High levels of demand from China drove the rise, with exports to the world’s second-largest economy up 15.4% year-on-year during June.

Geopolitics

President Donald Trump has told US companies they have 45 days to stop doing business with TikTok and WeChat, claiming the Chinese apps are a threat to national security. Mr Trump signed two executive orders targeting two of China's biggest apps. It is a major escalation in Washington's stand-off with Beijing over its power in global technology. The announcement comes as Microsoft is in talks to buy TikTok ahead of a 15 September deadline set by President Trump. Earlier in the week he said if a deal went through, the US government should get a cut of the transaction.

Trump administration officials have urged the president to delist Chinese companies that trade on US exchanges and fail to meet US auditing requirements by January 2022, Securities and Exchange Commission and Treasury officials said.

President Trump announced that he was re-imposing a 10% tariff on Canadian aluminium to help struggling American producers. This is likely to result in retaliation and worsen ties with Canada just a month after the countries’ new trade deal went into effect.

Negotiations between Republicans and Democrats on a fresh US stimulus package hit an impasse, bringing the talks to the brink of collapse.

Brexit

The government is to spend up to £355m on a new system for moving goods into Northern Ireland from the rest of the UK. From 1 January, goods entering Northern Ireland from Great Britain will need customs declarations. The Trader Support Service (TSS) will effectively see the government acting as a customs agent on behalf of businesses.

Technology

Facebook announced the US rollout of Instagram Reels, its rival to controversial Chinese app TikTok. The surge in the shares following the news brought chief executive mark Zuckerberg’s wealth to $100bn.

Energy

Brent crude prices rose 3.3% over the week by mid-session on Friday to trade at about $44.50 a barrel, as the dollar weakened. A pledge from Opec member Iraq to cut oil output further in August lent support.

BP shares rallied despite posting its worst quarter on record and halving its dividend. The company set out new plans to shift away from fossil fuels and towards clean energy. BP’s new chief executive, Bernard Looney, unveiled plans to grow low-carbon investments eightfold by 2025, and tenfold by 2030, while cutting its fossil fuel output by 40% from 2019 levels as part of his plan to reinvent BP as a “net zero carbon” company by 2050.

Mining and commodities

Precious metals continued to be in demand. The gold price rose above $2,000 an ounce for the first time this week. Investors have moved cash into the precious metal as Covid-19 cases rise in the US and more money is pumped into the global economy. The record high gold price has also been driven by concerns over tensions between Washington and Beijing. Prices of other precious metals, including silver, have also risen sharply since the start of this year.

Water is without doubt the most valuable commodity on the planet – more significant than gold or data – because we die in about four days if we can’t get a drink. Garry White looks at why investors can’t ignore water scarcity here.

Property

The government’s stamp duty holiday and low interest rates have supported the UK property market. House prices in the UK jumped 3.8% year-on-year, according to Halifax’s house price index – with the average prices rising to a record high of £241,604.

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.

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