Week in Review: Markets Rise on Stimulus Hope & Vaccine Approval

The global stock market rally extended to the first week of December. Major indices closed at record highs as expectations for additional U.S. fiscal stimulus and the approval of a Covid-19 vaccine in the U.K. fueled market optimism.  On Monday, the Dow Jones Industrial Average closed out November with its best monthly performance since 1987, whilst the technology heavy Nasdaq Composite Index went on to reach a new all-time high.

Rising hopes for a new round of U.S. fiscal stimulus appeared to boost sentiment. A bipartisan group of U.S. senators proposed a $908 billion relief package, although Senate Majority Leader Mitch McConnell announced that he was considering a smaller plan in the range of USD 500 billion. Nevertheless, the increased possibility for a deal before year-end encouraged markets.

On Wednesday, the U.K. became the first western country to approve a Covid-19 vaccine, with its regulator clearing the Pfizer-BioNTech shot ahead of decisions in the U.S. and European Union. Although Pfizer commented that production had been slowed due to supply chain problems, the company reaffirmed that they remained on track to deliver 50 million doses in 2020 and another 1.3 billion in 2021. Moderna also requested emergency use authorisation for its vaccine from both European and U.S. regulators this week.

Remaining on the topic of Covid-19, new information has revealed that Covid-19 was already in the U.S. in December 2019, providing further evidence that the coronavirus was spreading globally weeks before the first cases were reported in China.

Interestingly, recent U.S. Black Friday shopping data showed that store sales fell by 52.1% compared with last year, whilst online purchases surged by 21.6% to hit a new record as consumers rang up $9 billion worth of purchases. U.S. unemployment meanwhile fell to a pandemic low of 6.7% in October.

Brexit negotiations remain on ‘’pause’’ despite the nearing 31 December deadline as “significant divergences” still remain. Negotiators will try to finalise a deal before the EU leaders’ summit next week, according to press reports.

The OECD now predicts that global GDP will contract by 4.2% this year, which is an improvement on the previous forecast of 4.5%. At the same time, it lowered its 2021 forecast to 4.2% from 5.0%.

U.S.-China relations remain strained as the U.S. House of Representatives approved legislation that could lead to Chinese companies including Alibaba and Baidu being forced to delist from U.S. exchanges, if Washington regulators are not allowed to review their financial audits.

Global equity indices ended the week stronger. In the U.S., the Dow Jones (+1.03%), S&P 500 (+1.67%) and the Nasdaq (+2.12%) all ended the week stronger. Similarly, in Europe, the Euro Stoxx 50 (+0.33%) and FTSE 100 (+2.87%) were positive, along with Japan’s Nikkei 225 Index (+0.40%) and China’s Shanghai Composite Index (+1.06%).

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Market Moves of the Week

President Ramaphosa announced on Thursday that only Nelson Mandela Bay in the Eastern Cape would be subjected to tighter restrictions, which include an earlier 10pm-4am curfew, curbs on the sale of alcohol from Monday to Thursday and reduced numbers for gatherings. He raised concern about the resurgence of Covid-19 cases in other parts of the Eastern Cape and the Garden Route, but did not implement tighter regulations in those areas.

South Africa's Labour Appeal Court reserved judgment on Wednesday on a public sector wage dispute that has big implications for SA’s government efforts to arrest soaring debt. The dispute centres on whether the government should pay civil servants salary increases that were due to come into force in April 2020 as part of a three-year deal struck in 2018, but government kept wages flat at this year’s anniversary date, saying it could not afford the increases due to the COVID-19 pandemic. The court's judges did not say when they would hand down their judgment.

The JSE All Share Index ended the week up +2.76%, led higher by the resource (+7.97%) and financial (+0.60%) sectors, whilst industrial shares (-0.17%) lost some ground. The USD Dollar weakened against most currencies this week, resulting in the rand trading at R15.19 to the U.S. Dollar by Friday market close. The rand weakened against the Euro (+0.86%) and Pound Sterling (+0.53%).

Market Moves - 6 Dec 2020
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Chart of the Week

The U.S. Dollar Index, a measure of the value of the U.S. dollar relative to a basket of currencies of the U.S.'s most significant trading partners, is now down almost 12% from its March high and down 6% since the start of this year.

Chart of the week - 6 Dec 2020

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