Global update: Rising infection levels knock sentiment

Share prices generally fell during September amid concerns over rising infection levels and their potential impact on economic activity. Investors’ worries were compounded by doubts over Brexit negotiations, continuing friction between the US and China over trade, and uncertainties surrounding the impending US Presidential election.


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  • The possibility of negative rates moved closer for the UK
  • Inflation in the eurozone slipped into negative territory
  • Yoshihide Suga took office as Japan’s Prime Minister

Share prices generally fell during September amid concerns over rising infection levels and their potential impact on economic activity. Investors’ worries were compounded by doubts over Brexit negotiations, continuing friction between the US and China over trade, and uncertainties surrounding the impending US Presidential election.

The BoE warned that the economic outlook for the UK remained “unusually uncertain”

In the US, the Federal Reserve (Fed) sought to boost investor sentiment by reiterating its intention to maintain its key federal funds rate near zero until the economic recovery is “far along”. Fed Chair Jerome Powell also urged Congress to do its part in supporting the economy. The Dow Jones Industrial Average Index fell by 2.3% during September; meanwhile, the Nasdaq Index - which has performed particularly strongly in recent months – dropped by 5.2% as investors took profits.

In the UK, the imposition of fresh regional lockdowns alongside broader restrictions on socialising drove down share prices, and the FTSE 100 Index fell by 1.6%. Chancellor of the Exchequer Rishi Sunak announced that the furlough scheme will be replaced by the Job Support Scheme, in which the Government and employers will top up the salaries of workers in “viable” jobs. The Bank of England (BoE) warned that the economic outlook for the UK remained “unusually uncertain”. Although BoE officials appear to be moving closer to considering negative interest rates as a means to bolster the economy, the BoE’s Chief Economist Andy Haldane subsequently played down speculation over any imminent prospect of negative rates.

Following the resignation of Shinzo Abe on health grounds in August, Yoshihide Suga took office as Japan’s Prime Minister in September as expected. Japan’s economic contraction in the three months to June proved worse than initially calculated. The country’s economy shrank at an annualised rate of 28.1% during the period, compared with an initial estimate of -27.8%. The Nikkei 225 Index rose by 0.2% in September.

The World Health Organisation (WHO) warned that rising infection rates across Europe should be “a wake-up call”, and European Central Bank (ECB) President Christine Lagarde cautioned that the pandemic will continue to weigh on economic activity in the region. The annualised rate of inflation in the eurozone slipped into negative territory for the first time since May 2016 during August, falling from 0.4% to -0.2%. The news triggered speculation that the ECB will have to increase stimulus measures. The DAX Index fell by 1.4% over September.


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