Market Update

Market Commentary November 2020

Posted: 26th November 2020   |   Share

By Sarah Ryman

Christmas Covid

A new President, vaccine breakthrough and Christmas is coming but the UK Prime Minister reminds us ‘Tis the season to be jolly careful’ as Covid looms in the background. 


Andrew Bailey, governor of the Bank of England has announced a further £150 billion of support as tighter lockdown rules hit the UK economy this month. He vowed to do “everything we can” to support recovery whilst keeping interest rates on hold at 0.1%. He also commented that the vaccine advance is ‘very encouraging’ for the UK economy. Boris Johnson has indicated that the tier system of restrictions will last until the end of March as the UK government deficit is at a peacetime high and households continue to feel the strain.

This month saw vaccine progress and the NHS is being asked to prepare to deploy any Covid-19 vaccine from early next month with the most vulnerable first in line to receive the Covid cloak of invisibility. Early trial results show that vaccines are more than 90% effective and whilst there are a number of hurdles to overcome, financial markets responded positively to the news. 

UK unemployment rose to 4.8% in the three months to September creeping gradually higher with the expectation that, despite an extension to the furlough scheme to the end of March, unemployment will move higher in coming months. Chancellor Rishi Sunak has highlighted that this is a key priority as part of his spending review and intends to promise a £4.3 billion package to help hundreds of thousands back to work. He introduced his historic address: “Our health emergency is not yet over and our economic emergency has only just begun.”

UK GDP shot up 15.5% in the three months to September in comparison to the previous quarter which is the quickest pace since records began in 1955, according to the Office for National Statistics. However, this is still 9.7% less than the final three months of 2019. Recent restrictions are likely to have a further negative impact on economic growth.

Retail sales dropped in November, year on year, but online sales moved higher growing at the fastest pace since October 2018 supporting hopes that the autumn lockdown may not be quite as detrimental to the economy as lockdown part one. Retailers will be looking to salvage what they can from a incommodious year.


The European Central Banks president Christine Lagarde commented: “The key challenge for policymakers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum.”  She said that financing costs will remain “exceptionally favourable” until the economy recovers from the pandemic.  Such commentary supports market expectations that the ECB will expand bond-buying (the pandemic emergency purchase programme - PEPP - currently stands at EUR640 billion) and continue cheap lending. Its targeted longer-term refinancing operations (TLTRO) has lent almost UER1.5 trillion to banks at rates as low as minus 1%. Lagarde has refused to offer help for over-indebted Eurozone governments while the European Commission has urged EU member states not to build up unsustainable debt positions.

Brexit negotiators are exploring the idea of review clauses to break the deadlock in EU-UK trade talks with a view that parts of the deal could be revisited several years after they take effect. Time is ticking to find a way to overcome the stand-off ahead of the UK leaving the EU’s single market and customs union on the 31st December. EU chief executive Ursula von der Leyen has said that: “The next days are going to be decisive. The European Union is well prepared for a no-deal scenario.”


After a rather lengthy vote count Joe Biden won the race to become the next US president and declared that now is the time for the US to “unite and heal”. Vice president Kamala Harris will become the first female to take on the role and markets rallied to new highs on news of the victory. Trump wasn’t best pleased refusing to accept the result claiming “electoral fraud” and threatening that he will not concede. Eventually, nearly three weeks later, he instructed officials to “do what needs to be done” but still stopped short of concession. 

The US Treasury has not extended some of the Federal Reserve’s emergency lending measures which prompted the Fed to warn that the US economy remained “strained and vulnerable” in the face of an uncertain outlook and rising coronavirus cases. With a new administration incoming markets will be watching with keen interest for indication of how the economy will be supported.


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