Week in Review: No-deal Brexit Looms

British Prime Minister Boris Johnson and European Commission president Ursula von der Leyen have both warned that a no-deal outcome looks more likely than an agreement. Last week it appeared that a post-Brexit trade deal was in reach, but optimism has faded as negotiators have failed to work out acceptable rules for UK access to EU markets and the so-called level playing field that would tie the UK to future EU standards.

In the U.S. the Food and Drug Administration (“FDA”) has approved Pfizer and BioNTech’s coronavirus vaccine for emergency use.  FDA Chief Scientist Denise Hinton told Pfizer in a letter Friday that she was authorizing the emergency use of the company’s vaccine. The government plans to distribute 2.9 million doses of the vaccine within 24 hours, followed by an additional 2.9 million doses 21 days later for patients to get their second shot. Late-stage clinical trial data shows Pfizer’s vaccine is 95% effective in preventing Covid, is safe and appears to fend off severe disease. The FDA clearance marks a record-breaking time frame for a process that normally takes about a decade.

For months, policymakers in the U.S. have been unable to agree on a much-needed stimulus plan. The most recent proposal from the bipartisan group, a $908 billion stimulus package, includes $6 billion for vaccine development and distribution, as well as $35 billion to support health-care providers. As Congress struggles to reach a deal, the first vaccines are expected to begin arriving at sites across the U.S. on Monday.

On Friday the U.S. Supreme Court rejected a bid launched by Texas and backed by President Donald Trump that sought to undo President-elect Joe Biden’s election wins in the key swing states of Georgia, Michigan, Pennsylvania and Wisconsin. The electoral college meets on Monday with President-elect Biden expected to reach 306 electoral votes, more than the 270 needed to elect a president, to 232 votes for President Donald Trump.

Demand for recent US initial public offerings (IPOs) also suggested investors are generally upbeat on equities. Shares of Airbnb more than doubled in their stock market debut on Thursday, valuing the home rental firm at just over $100bn in the biggest US IPO of 2020.

Major U.S. indices hit new highs on Wednesday but pulled back to end the week lower: Dow Jones (-0.57%), S&P 500 (-0.96%) and the Nasdaq (-0.69%).

European shares fell on concerns around the rising numbers of coronavirus cases in key economies and uncertainty surrounding a post-Brexit trade deal. In local currency terms, the pan-European STOXX Europe 50 Index ended the week 1.51% lower, while the UK’s FTSE 100 Index was flat.

Chinese equities fell on renewed tensions with the U.S. after a second major index provider removed some Chinese companies from its benchmarks following a Trump administration executive order. The Shanghai Composite Index shed 2.8% over the week.

Market Moves of the Week

The JSE all-share index ended the week flat with the listed property sector building on recent gains.

On Tuesday Stats SA released SA’s third-quarter GDP number which beat market expectations of 55% to record an annualised growth rate of 66%. A surge in exports and weak imports aiding the local economy over the period.

The South African Reserve Bank also released SA’s current account balance during the week, which recorded a surplus of 5.9% of GDP in the third quarter, against a deficit of 2.9% in the second quarter, providing further support to the local economy and the rand. After firming earlier in the week to trade at below R15/$, the rand weakened marginally to close the week at R15.14/$.

Power utility Eskom said on Friday night that stage 2 load-shedding would be implemented from 6am to 11pm on Saturday. The rotational power cuts would continue on Sunday— with the “system severely constrained”.

Chart of the Week

It is expected that a no-deal Brexit would lead to immediate food price inflation in the UK – driving consumer prices higher. The value of the pound would also more than likely be negatively impacted, increasing the cost of imports should a trade deal not be finalised. Britain and the EU have set a deadline of Sunday December 13 (today) to find an agreement, before Britain’s exit from the bloc on January 1^st 2021.

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