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Market Commentary December 2020

Posted: 11th December 2020   |   Share

By Sarah Ryman

Covid Christmas

All I want for Christmas is a vaccine…

Wow what a year 2020 has been. A year in which we have seen significant social and economic disruption, worldwide protests, a new US president, mass cancellation of events, home working becoming the norm, Captain Sir Thomas Moore raising astonishing sums of money for the NHS and Joe Wicks making an appearance in many family homes at 9am each morning.  What will 2021 hold? 

Well the month of December started with Moderna and Pfizer/BioNTech filing for vaccine approval and by the 8th December we had ‘V-Day’ with the first vaccine (outside of a trial) being administered.  Distribution of the jab will be gradually rolled out fulfilling a Christmas wish for some.  Markets have responded with optimism as such developments, along with ultra-easy monetary policy, should assist economic recovery in 2021 but a question mark remains over Brexit. 

UK

There was another shock for the UK high street this month with Philip Green’s empire Arcadia appointing administrators.  The closure of Debenhams alone puts 12,000 jobs at risk.  The future of other stores within the group including Topshop, Dorothy Perkins and Burton is in question as Deloitte search for buyers and pressure mounts on Mr Green to plug the Arcadia pensions gap himself. 

A looming Brexit deadline and ongoing Covid battles has prompted the OECD to downgrade the UK's economic outlook this month.  

UK house prices have grown at the fastest rate since 2015 as buyers try to beat the stamp duty holiday and whilst the second lockdown caused UK business activity to contract sharply last month the Purchasing managers index for services did not fall as low as analysts feared.  The reading of 47.6 still demonstrates contraction but was higher than the estimated 45.8.   

Michael Saunders, Bank of England policymaker, said this month: “In my view, there may be some modest scope to cut Bank Rate further but, if we do, it may be preferable to move in relatively small steps”.  This as the BoE review the feasibility of taking its benchmark rate negative from the current 0.1% and the central bank expects that the recovery to pre-pandemic levels will not materialise until 2022. 

EUROPE

The second wave of coronavirus infections and further lockdown restrictions poses ‘a considerable risk’ to the Eurozone economy the International Monetary Fund have warned.  Further asset purchases and continuation of cheap loans for banks are being used to try to support the economy.  There was a glimmer of hope however with Germany’s factory orders reaching pre-pandemic levels. 

As I type Brussels are putting in plans to prevent chaos in the event of a no deal Brexit as talks continue without a clear path to resolution and the pound is falling as Ursula von der Leyen, European Commission president, told EU leaders that no-deal appears to be the most likely outcome of trade talks with the UK.

The European Central Bank has launched a fresh round of stimulus, as broadly expected, increasing the pandemic emergency purchase programme from EUR1.35 trillion to EUR1.85 trillion and said it would extend its main crisis-fighting tools expiry to at least the end of 2023.  Rates were unchanged at minus 0.50%.

US                                                                                        

This month saw the US Supreme Court reject a request by Pennsylvania Republicans to undo the certification of Joe Biden’s victory in the state signalling that Donald Trump’s efforts to overturn the election through litigation has now come to an end.  The US electoral process has confirmed that Mr Biden has a clear victory. 

The Food and Drug Administration seem likely to grant an emergency authorisation to get the Pfizer/BioNTech Covid 19 vaccine approved swiftly in the US whilst the government offer help to increase production.  Jobless claims moved higher as a surge in cases spurred a new round of shutdowns.    

A slightly earlier publication on the monthly commentary this month due to annual leave.  Please be mindful that the bank will be closed on the 25th and 28th December along with the 1st January.  I wish you all a happy and healthy festive season and a new year of good health, happiness and success.  See you in 2021! 

DISCLAIMER NOTICE:

Any statements, data, and information in the Market Commentary which appears to be factual in nature are based on sources, including published sources, which Bank Leumi UK believes to be reliable but has not independently verified. Bank Leumi (UK) plc does not make any guarantee, representation, or warranty as to the accuracy or completeness of such statements.  This material is based on public information as of the specified date, and may be stale thereafter.  We have no obligation to tell you when information herein may change.  Consequently Bank Leumi (UK) plc is not responsible for its contents nor any losses, expenditure or damages which may be incurred as a result of relying on such contents.  We reiterate that no representation, warranty or undertaking, express or implied is given to the accuracy or completeness of the information contained in the Market Commentary, and Bank Leumi (UK) plc does not accept any liability for losses which might arise from any use of the information.

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