After a tumultuous year in which the coronavirus pandemic gripped the world, many major stock markets ended 2020 in positive territory. Investor sentiment was buoyed towards the end of the year by optimism over the prospect of widespread vaccination programmes that are expected to underpin economic recovery, alongside anticipation of further support from leading central banks.
- A Brexit trade deal was reached with days to spare
- UK financial services companies lost their “passporting” rights
- President Trump approved a coronavirus relief package
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After a tumultuous year in which the coronavirus pandemic gripped the world, many major stock markets ended 2020 in positive territory. Investor sentiment was buoyed towards the end of the year by optimism over the prospect of widespread vaccination programmes that are expected to underpin economic recovery, alongside anticipation of further support from leading central banks. By the end of the year, the World Health Organisation (WHO) reported that over 80 million cases had been diagnosed worldwide with 1.8 million deaths confirmed.
“Positivity was tempered by concerns over the outlook for the UK’s important financial sector”
Confidence also received a boost from an eleventh-hour Brexit trade deal, secured only days before the transition period was due to expire. Nevertheless, Brexit-related positivity was tempered by concerns over the outlook for the UK’s important financial sector, which was not covered by the deal. As a result, UK financial services companies will no longer have the financial “passporting” rights that allow them to trade freely within the single market without additional regulatory authorisation, and this problem has yet to be resolved.
The UK bucked the trend amongst leading equity markets over 2020: although the FTSE 100 Index rose by 3.1% during December, it ended the year 14.3% lower, blighted by warnings of a new and more infectious variant of the Covid-19 virus. Rising infection rates and worries over the impact on hospital capacity triggered the imposition of fresh restrictions on a large proportion of the UK population and a widespread travel ban from other countries. The move created fresh concerns over prospects for economic recovery, and the Government announced another extension to its furlough scheme, which is now scheduled to finish at the end of April 2021.
After considerable delays, President Donald Trump signed into law a coronavirus relief package worth US$900 billion, narrowly avoiding a partial shutdown of the federal government. President Trump is set to leave office when President-elect Joe Biden is inaugurated on 20 January, although President Trump has continued to insist that the Presidential election was fraudulent. The Dow Jones Industrial Average Index rose by 3.3% over December and climbed by 7.2% over the year.
In the eurozone, the European Central Bank (ECB) expanded its programme of stimulus measures and raised lending to banks that continue to extend loans to businesses and households. During December, Germany’s Dax Index rose by 3.3%, posting an increase of 3.5% over 2020.
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