Weekly Market Update

10/02/2020

Markets shrugged off the impact of the spread of a novel coronavirus to record a series of new highs, hoping that central bank action will continue to boost markets. The gains were helped by China announcing a reduction in US tariffs to help its ailing economy alongside their recently injection of stimulus.

Although the virus spread is still limited outside China, the coronavirus remains the dominant global concern. The International Monetary Fund joined the growing club of organisations warning about the effect that the virus would have on global growth. Fundamentally, complacency, is helping risk assets recover despite a lack of confirmation for now that the worst has passed.

In the US, the attempt to impeach Donald Trump proved unsuccessful as expected. The Senate acquitted the president on both articles of impeachment. The Democrats conducted a shambolic first caucus in Iowa, which effectively saw President Trump’s approval ratings climb which continues to be well received by US markets.

Federal Reserve chair Jay Powell delivers his semi-annual testimony to Congress this week where he is expected to strike a dovish tone as he provides an update on the outlook for the US economy and monetary policy. Markets will be considering if the coronavirus could be that material change that tempts them into a supportive rate cut.

With the UK officially leaving the European Union the other week, the country entered the Brexit transition period. The prime minister’s declared aim of concluding a deal by the end of the year has conjured up the spectre of a no-deal exit once more. As both sides set out their initial negotiating positions, the pound fell sharply helping the FTSE 100 to a solid revival over the week.

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