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23 November 2020

Global Markets Lift Following Positive Vaccine News

Global markets offered subdued results last week as investors remained focused on the ongoing pandemic. The FTSE 100 gained 0.51%, while the US S&P 500 added 0.81% as concerning US COVID-19 infection rates and hospitalisations were overshadowed by further promising vaccine developments from US-biotech firm Moderna.

A rise in the cost of clothing and food helped to push UK inflation higher than expected last month, with the rate jumping to 0.7% in October from 0.5% in September. According to the Office for National Statistics (ONS), the rate of inflation increased slightly as clothing prices rose and returned to their normal seasonal pattern, following the disruption earlier this year caused by lockdown measures. An increase in the price of fruit and vegetables mainly drove growth in food prices, with analysts expecting food price inflation to continue to rise throughout November, as supermarket demand continues to grow during the current lockdown. Computer games and second-hand cars also saw an increase in prices; however, they were partially offset by falls in the cost of energy and holidays.

According to UK Hospitality, the pandemic has led to the loss of about 660,000 jobs in the country’s hospitality sector this year whereas, at the end of 2019, the sector was the third-largest employer in the UK. Initially, the industry was expected to create one-in-six net new jobs in 2020, however 20% of the sector’s 3.2 million jobs have now gone, pushing its revenue down 40% compared with last year. After the Business, Energy and Industrial Strategy (BEIS) Committee gathered evidence from business leaders from a range of industries, it was deduced that there have been job losses across both big and small retailers, particularly in the clothing and footwear sector. It was also pointed out that some large retailers have been able to keep trading during lockdown, while many small shops have been forced to shut. As Christmas is the most important time of the year for retailers, the BEIS Committee highlighted that a mechanism for stores to remain open in a secure way during lockdown would have been more suitable and would have increased their likelihood of survival into the new year.
 
In global news, fifteen countries have now formed the world’s largest trading bloc, covering nearly a third of the global economy. Negotiations for the Regional Comprehensive Economic Partnership (RCEP) deal initially began in 2012 and were finalised earlier this month. The RCEP includes ten Southeast Asian countries, as well as China, South Korea, Japan, Australia, and New Zealand. However, it excludes the US, as President Donald Trump withdrew his country from the Trans-Pacific Partnership shortly after being elected.
 
The RCEP is expected to eliminate a range of tariffs on imports within 20 years, it also includes provisions on intellectual property, telecommunications, financial services, e-commerce, and professional services. Furthermore, under RCEP, parts from any member nation would be treated equally, giving companies in RCEP countries an incentive to look within the trade region for suppliers. According to estimates from the Peterson Institute for International Economics, the deal could increase global national income by US$186bn annually by 2030 and add a further 0.2% to the economy of its member states. We watch closely now, as China and its peripheral Asian economies emerge from the pandemic in a much healthier position than their global peers. The deal only adds to their long-term future growth prospects.
 
According to the latest figures, Japan’s economy has bounced back from recession with growth of 5% in the third quarter, from a contraction of 8.2% in the previous quarter. The nation’s economy shrank throughout most of 2020, as lockdown measures hit its manufacturing sector and consumer spending. However, growth has now been driven from a rise in domestic demand as well as exports. Although the world’s third-biggest economy is now showing signs of recovery, analysts warned that further growth is likely to be limited, with the economy still expected to shrink by 5.6% for its full fiscal year.
 
Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Global Markets Lift Following Positive Vaccine News
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