Equity Markets Rattled By Surge In Coronavirus Infections

This week we were witness to a full-on wobble, with equity markets suffering a mini panic at the start of the week before regaining some composure. The trigger for the turmoil, which saw US equities sell off by about 6 per cent before picking up again, appears to have been rising infection rates in both the US and Europe. Quite why markets were so surprised by a pandemic that is rapidly approaching its first birthday is anyone’s guess.

Elsewhere, all eyes are on the US election. With Donald Trump trailing by around 9 per cent nationally and by 5 to 6 per cent in the key swing state of Pennsylvania, re-election would normally be considered virtually out of reach. With a big increase in mail-in voting due to the pandemic, it’s quite possible that we won’t know the result for days after the polls close. The nightmare scenario for American democracy is if Donald Trump is leading among in person voters on polling day and then launches a mighty court battle to stop as many postal vote counts as possible.

 

EQUITIES: GLOBAL MARKETS SPOOKED BY SECOND WAVE OF COVID-19
A surge in Covid-19 infections and the reimposition of lockdowns in Europe shook investor confidence and caused global equity markets to plunge at the beginning of the week. So far the UK and US are sticking with regional restrictions to contain the spread of coronavirus but rapidly rising infection rates have seen national lockdowns reintroduced in France and Ireland this week, while Germany, Italy and Spain have introduced tough nationwide restrictions on movement and socialising, including closing many businesses.

Sustained selling in the first half of the week saw many equity markets down by 6 per cent or more. The German equity market was one of the hardest hit, with the Dax index down by more than 5 per cent on Wednesday, it’s biggest daily drop since March. US equities were not spared the sell-off as the lack of progress on further financial stimulus added to market uncertainty. The S&P 500 was down 3.5 per cent on Wednesday and many markets are on track for their biggest weekly fall since the general sell-off in March.

 

US: RECORD GDP GROWTH BUT RECOVERY ALREADY RUNNING ON FUMES
The third quarter of the year saw the US economy grow at the fastest rate since 1945 as the country reopened following the coronavirus shutdown. Economic
output increased by 7.4 per cent compared to Q2. On an annualised basis, the US government’s usual metric, GDP was up 33 per cent in the three months to the end of September.

As the US presidential race enters its last few days, Donald Trump has used the news to claim responsibility for the record growth and to try and refocus the campaign on the economy. However, a closer look at the figures shows economic output remains well below its February 2020 peak as the recent bounce back was preceded by the biggest fall in economic output in US history. With coronavirus cases increasing rapidly in most US states and job losses remaining high the recovery already appears to be running out of steam.

 

ASIA: ANT FINANCIAL RAISES RECORD AMOUNT IN DUAL LISTING
Ant Financial is set for a record breaking IPO as it prepares to list on the Shanghai and Hong Kong stock exchanges. The Chinese online payments company, a spin off from Asian online retail giant Alibaba, is set to raise almost $37bn when the listing is complete. It had planned to raise $34bn but an extra allocation was triggered by the huge demand, as bids for shares on sale to retail investors were 870 times more than the initial number available. The listing will value the company at $316bn.

The listing will be the biggest IPO, passing the $29bn raised in Saudi Aramco’s lPO in December, and is the latest in what has been a bumper year for stock market listings. The recovery in equity markets since March and the low cost of borrowing have seen a number of large listings this year. Technology and retail stocks have been particularly in demand, with IPOs from Snowflake, JFrog, The Hut Group among the successful listings.

 

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Photo by Markus Spiske on Unsplash

 

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